European Parliament resolution on the recovery of Community funds (2005/2163(INI))
Date: 2006-10-24
Institutions: Committee on Budgetary Control, European Parliament
Subjects: European Anti-fraud Office, claim, financial management, fraud, fund (EU), redemption

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34.
Urges the Council and the Commission, in the framework of a European common immigration and
asylum policy, to include the risk of being subjected to female genital mutilation among the reasons for
requesting the right of asylum, in accordance with the international guidelines issued by the United Nations
High Commissioner for Refugees affirming that the international definition of refugees ‘covers gender-related
claims’;

35.
Urges the Member States which have not done so to ensure that effective and deterrent penalties
apply under their criminal codes to all forms of violence against women and children, particularly forced
marriage, polygamy, so-called crimes of honour and female genital mutilation, and to increase the awareness
of police and judicial authorities of those issues;

36.
Notes with concern that polygamous marriages have been recognised as legal in Member States, even
though polygamy is prohibited; calls on the Member States to ensure that the illegality of polygamy is
upheld; urges the Commission to consider including a ban on polygamous marriages in its current proposal
for introducing rules concerning applicable law in matrimonial matters;

37.
Calls on the Member States to enforce policies that ensure the equality of all people, such as that of
the 1951 Convention relating to the status of refugees, so that measures taken against illegal migration by
the Member States are fully compatible with the principles of non-discrimination;

Instructs its President to forward this resolution to the Council, the Commission and the govern-

38.
ments and parliaments of the Member States.

P6_TA(2006)0438

Recovery of Community funds

European Parliament resolution on the recovery of Community funds (2005/2163(INI))

The European Parliament,

— having regard to the Commission's white paper on its reform (COM(2000)0200) and, in particular, the
part thereof relating to action 96 concerning the more effective management of recovery of unduly
paid funds,

— having regard to the Commission communication entitled ‘Improving the recovery of Community enti-
tlements arising from direct and shared management of Community expenditure’ (COM(2002)0671),

— having regard to the report from the Commission to the Council and the European Parliament on the
use of the provisions on mutual assistance for the recovery of claims relating to certain levies, duties,
taxes and other measures (COM(2006)0043),

— having regard to its resolution of 8 April 2003 on the discharge for 2001 (1), especially paragraphs 39

to 43 thereof,

— having regard to its resolution of 29 January 2004 on the follow-up to the discharge for 2001 (2),

especially paragraphs 7 to 9 thereof,

— having regard to its resolution of 21 April 2004 on the discharge for 2002 (3), especially paragraph 7

thereof,

— having regard to its resolution of 12 April 2005 on the discharge for 2003 (4), especially paragraphs 83

to 85 thereof,

(1) OJ C 64 E, 12.3.2004, p. 199.
(2) OJ C 96 E, 21.4.2004, p. 112.
(3) OJ C 104 E, 30.4.2004, p. 640.
(4) OJ C 33 E, 9.2.2006, p. 169.

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— having regard to its resolution of 7 June 2005 on the protection of the Communities' financial interests

and the fight against fraud (1),

— having regard to the Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Finan-
cial Regulation applicable to the general budget of the European Communities (2), especially Article 72
thereof,

— having regard to Commission Regulation (EC, Euratom) No 2342/2002 (3) laying down detailed rules
for the implementation of Council Regulation (EC, Euratom) No 1605/2002, and particularly Article 78
(3)(f) and Article 84 thereof,

— having regard to the report of the Commission to the Council and the European Parliament on the

application of the implementing rules for the new Financial Regulation (COM(2005)0181),

— having regard to the proposal for a Council regulation amending Council Regulation (EC, Euratom)
No 1605/2002 on the Financial Regulation applicable to the budget of the European Communities
(COM(2005)0181),

— having regard to Regulation (EEC) No 595/91 (4), especially Articles 3 and 5 thereof as regards irregula-

rities and fraud, and to Regulations (EC) Nos 1469/95 (5), 515/97 (6) and 1258/1999 (7),

— having regard to Regulation (EC) No 1290/2005 of 21 June 2005 on the financing of the common

agricultural policy (8) (the new CAP Regulation), especially Article 32 thereof,

— having regard to the judgment of the Court of Justice of the European Communities in Case C-87/01 P

Commission v CEMR (9),

— having regard to Article 256 of the EC Treaty,

— having regard to Rule 45 of its Rules of Procedure,

— having regard to the report of the Committee on Budgetary Control (A6-0303/2006),

A. whereas the Commission has still not implemented the detailed action plan for quantifying, identifying
and explaining the use of the sums actually paid in interest and penalty fees to the agricultural payment
agencies, as Parliament called for in paragraphs 39 to 43 of its above mentioned resolution on the
discharge for 2001,

B. whereas Parliament noted with concern in its above mentioned resolution on the follow-up to the
discharge for 2001 the absence of any such detailed plan; whereas the amounts of the Community
funds recovered on a basis of shared management are not regularly entered in the EU budget,

C. having regard to the joint seminar organised in Bled, Slovenia, on 30 March 2006 by the Slovenian
customs authorities and the European Anti-fraud Office (OLAF), which brought together veterinarians,
health experts and anti-fraud investigators to discuss the action to be taken to combat illegal trade in
agricultural products and the resultant health risks to consumers,

The Financial Regulation

1.
Recalls that the Financial Regulation states that the recovery of sums owing to the EU may, should the
debtor not voluntarily effect the reimbursement, be secured by judicial means or by an enforcement order
obtained pursuant to Article 256 of the EC Treaty;

(1) OJ C 124 E, 25.5.2006, p. 232.
(2) OJ L 248, 16.9.2002, p. 1.
(3) OJ L 357, 31.12.2002, p. 1.
(4) OJ L 92, 13.4.1991, p. 43.
(5) OJ L 145, 29.6.1995, p. 1.
(6) OJ L 82, 22.3.1997, p. 1.
(7) OJ L 160, 26.6.1999, p. 103.
(8) OJ L 209, 11.8.2005, p. 1.
(9)

[2003] ECR I-7617.

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2. Welcomes, as far as recovery is concerned, the three proposals submitted by the Commission in the
framework of the 2002 reform of the Financial Regulation, whose main features are as follows:

— recognition of the privileged nature of debts owed to the Community, on the grounds of equivalence to

Member States' tax debts;

— a five-year deadline for recovery of sums owed to the Community, subject naturally to the possibility of
prolonging this deadline where active steps are being taken to secure recovery; this would create greater
security for the institutions and for debtors;

— making sums owed to the Community equivalent to sums owed in the civil sphere, in line with the
instruments adopted in the field of civil judicial cooperation (cf. Articles 72(2), 73a and 73b of the
above mentioned proposal
for a Council regulation amending Council Regulation (EC, Euratom)
No 1605/2002;

3.
Calls on the Commission to prepare a revision of the Financial Regulation, especially its implementing
rules, with a view to clarifying the exact classification in accrual terms of the sums owed in the context of
different types of Community payment;

4.
Recalls that this proposal is covered by Article 3(1) of the implementing rules for the Financial Reg-
ulation; recalls further that Article 105 of the implementing rules distinguishes between pre-financing,
interim payments and closure of the expenditure and that a distinction is also made between pre-financing
paid to Member States in performance of a contract within the meaning of Article 88 of the Financial
Regulation or under pre-accession instruments and advances pursuant to Article 265 of the implementing
rules for the Financial Regulation;

5.
Notes that arrangements must be made to recover advance payments in cases where a project has to
be discontinued owing to force majeure or for other reasons; notes also that such cases can be dealt with
not by recovering the sum owed, but rather by offsetting it against a due and certain claim on the European
Union by the contractual partner under another contract;

6.
Takes the view that the legitimate expectations of the beneficiary should as a rule be protected where
he has used the monies or made arrangements relating to the monies which cannot be cancelled or can be
cancelled only subject to unreasonable penalties; is of the opinion that the beneficiary cannot invoke legit-
imate expectations where:

(a) he has obtained authorisation of expenditure through deliberate deception, threat or bribery;

(b)

(c)

the authorisation of expenditure has been obtained by supplying information which in essential respects
was incorrect or incomplete; and

the beneficiary was aware of the illegal nature of the measures on which the authorisation was based or
was unaware thereof owing to gross negligence;

7.
Considers that the Commission should submit to Parliament, at regular intervals, an overview of out-
standing amounts to be recovered broken down by the total owed per directorate-general and the length of
time for which each amount has been outstanding;

Considers that the principles of budget universality and accuracy, as embodied in the Treaty and the

8.
Financial Regulation, must be respected by the implementing rules and the sectoral legislation;

9.
Considers, furthermore, that the Member States need above all to prove their compliance with inter-
national accounting standards, and that it needs to be asked whether that could be used by the EU in order
to develop a common approach in the matter;

10.
Points out that, pursuant to Article 78(1)(c) of the Financial Regulation, the authorising officer may
ascertain whether expenditure is consistent with the provisions of the contract, and that, before the author-
ising officer can forward the recovery order to the accounting officer, he must consider whether the bene-
ficiary could legitimately expect that the expenditure would be authorised and whether those expectations
should be protected given the public interest in the recovery of the sums owed;

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11.
Notes that too little use is made of the possibility of granting the debtor additional time for payment
against the lodging of a guarantee and payment of default interest pursuant to Article 85 of the implement-
ing rules for the Financial Regulation with a view to recovering at least a part of the sum owed;

12.
Notes that, in most cases, recovery is effected by offsetting the sum owed against a debt payable to
the contractual partner, if the conditions governing offsetting have been met; notes also that in cases where
offsetting is not possible, the sum owed can ultimately be recovered only by threatening the contractual
partner with the discontinuance of his services unless he repays the sum owed;

13.
Considers it important to point out that the authorising officer should inform OLAF immediately if
he establishes that the expenditure is not consistent with the contract or that authorisation was obtained by
deceit, threat or bribery;

Procedures

Notes that, seven years after the outbreak of the ‘Italburro’ scandal over adulterated butter and despite

14.
the attention paid to the matter by the EU institutions, notably Parliament and the Commission (OLAF):

(a)

the sum recovered is less than 0,1 % of the estimated amount of the fraud;

(b)

the action of the Italian authorities, thanks to which it was possible to dismantle the criminal network,
bring dozens of perpetrators to justice, confiscate hundreds of tonnes of adulterated products and
collect proofs of trafficking in tens of thousands of tonnes of adulterated butter sent to other Member
States, has had almost no follow-up, and the level of EU cooperation has been particularly disappoint-
ing, if not non-existent;

(c)

the Member States have different and mutually incompatible procedures, and the very fact that traffick-
ing in adulterated substances is a crime in one Member State and a purely administrative problem in
another has meant that the sum recovered has been a mere one tenth of that expected;

(d) public health has been neglected, with no-one to date having analysed the possible contamination of

the butter by the use of substances prohibited for food products in the wake of the BSE crisis;

15.
Notes that although the Commission has acknowledged the existence of wrongdoing in the so-called
Blue Dragon affair and has decided to cut EU funds corresponding to the fraud, it considers it to be the sole
responsibility of the Member State that shares the management of these funds to investigate the full extent
of the alleged irregularity, to pursue its culprits, and/or to seek compensation for the victims of the fraud;
notes also the fact that the Blue Dragon affair falls between two Member States, Spain and France, which
makes the attribution of responsibility more difficult and which gives it a more obviously European char-
acter; considers that the Commission is a public authority with direct responsibilities concerning European
citizens, on whose trust it depends — through the European Parliament — and that, therefore, the Com-
mission should not only seek to recover European funds from a Member State where they have been
misused, but should also use its best endeavours to see that wrongdoers are prosecuted and their victims
compensated;

Recalls that the procedure for recovery of sums owed by legal means by an enforcement order, which
16.
may be obtained under Article 256 of the EC Treaty, has thus far been used only in exceptional circum-
stances, essentially for the recovery of fines imposed in competition cases; notes the Commission's intention,
pursuant to the Financial Regulation, to widen the scope of the procedure in future;

17.
Stresses that the procedure currently followed by the Commission with regard to recovery, which is
of an institutional nature and consists, in the absence of voluntary payment, of addressing the national
authorities, is far too long-winded, and that the forced recovery of the sum owed cannot in that case be
effected or,
is subject to delays which are contrary to the Communities' financial
interests;

in the best of cases,

18.
Considers, with regard to enforcement orders, that communications between the Commission and
the Member States would have to be simplified and that closer links need to be established between the
Commission's services and those responsible in the Member States;

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Reform of OLAF

19.
Believes, in addition, that it is necessary to reflect on how to compensate for the lack of means on
the part of the national authorities responsible for legal proceedings in order to reach a correct estimate of
the complexity of the fraud problem in the EU, and also to consider how the Union bodies responsible
should best deal with the national control authorities, in order to alert them and involve them in investigat-
ing fraud-related cases; recalls that by their nature the national fraud authorities are not under a binding
obligation to involve those bodies;

Believes, furthermore, that the possibility of closer cooperation with Eurojust and Europol needs to
20.
be explored in order to strengthen the real protection of the Union's financial
interests, as well as an
evaluation of the possibility of OLAF's full administrative independence from the Commission and the
other institutions;

21.
Notes that the Court of Auditors' Special Report No 1/2005 described the present organisation of
OLAF in regard to the independence of its investigative activities and its administrative cooperation with the
Commission as functioning well, and that, in particular, the report noted that independence was guaranteed
in practice, since the Commission had not interfered in OLAF's work;

22.
Notes that, despite the measures already decided, the issue of the clarification of the rules on opening
and closing OLAF inquiries, as well as on their extension, will require further legislative initiatives, which
should also involve strengthening the link between the Parliament and OLAF;

23.

Awaits with interest the Commission's proposal for a regulation on the reform of OLAF;

Public health

Recalls that under the rules in force only legal, healthy and market-friendly products are eligible for

24.
refunds, and that products not meeting those conditions are ineligible for aid of any kind;

Observes, as the Director of OLAF pointed out at the above mentioned meeting in Bled, that fraud in

25.
trade in agricultural products is a clear potential risk to human and animal health;

Stresses the need to make the national and international control services more aware of this prob-
26.
lem, and that only close cooperation at international level, also involving third countries, can in the long
term ensure the better protection of the consumer and of the Union's financial interests;

Stresses that the various illegal practices analysed reveal the urgent need for closer cooperation

27.
between the national customs authorities, the veterinary services and EU authorities such as OLAF;

Stresses that the Commission, unlike the Member States, has no powers of control as regards product

28.
analysis in relation to consumer health in the Union;

29.
Recalls that in the adulterated butter case the initial fraud concerned not a health matter but the
composition of the incriminated products, which were from a sector receiving large amounts in Community
subsidies;

30.
Believes that the Commission and OLAF should ensure that the Member States, through their quasi-
public bodies, are able to carry out a sufficient number of properly effective controls using genuinely
independent inspectors;

Considers that, where a fraud could at a given moment have health repercussions, the health services
in the context of a properly conducted procedure, to

31.
responsible should be informed and have access,
samples, and that such samples should be kept for a considerably longer period;

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OLAF inquiries and national procedures

Notes that OLAF does not possess suitable information on the quantities of incriminated products,
32.
law context has proved disastrous from the viewpoint of
while undertaking the inquiries in a criminal
recovery, even if it is true that in strictly legal terms OLAF is entitled, on behalf of the Commission, to
contest a national decision;

33.
Recalls that, while in some countries recovery proceedings may be initiated even if a criminal action
is under way, in others the criminal law has precedence over the civil law, so that the existence of an action
on the part of a judicial authority makes it impossible to recover the disputed sums;

34.
Deplores the fact that in some Member States irregularities and frauds are admitted only in respect of
individually proven sums, that is, lot by lot, and that where no lot is present the operator is automatically
deemed innocent;

Notification and recording of irregularities and recoveries

35.
Regrets the Commission's failure to implement the action plan referred to in paragraphs 39 to 43 of
the above mentioned resolution on the discharge for 2001 and in the resolution on the follow-up to the
discharge;

36. Welcomes the Commission's positive reply to Parliament's repeated demands — namely those
expressed in paragraph 102 of its above-mentioned resolution on the discharge for 2001 — for public
disclosure of the amounts received by and the names of the beneficiaries under the EU budget, as proposed
in the European Transparency Initiative (COM(2006)0194 — SEC(2005)1300); regrets, however, that the
equivalent information regarding recoveries of Community funds is excluded from the European Transpar-
ency Initiative; calls on the Commission to make available to the budgetary authority and ultimately to the
public the names and amounts of recoveries due under or credited to the EU budget, as well as the final
destination of these sums;

37.
Considers it essential that the regulatory framework should include the provision of full accounts
regarding all sums owed arising from irregularities, the sums recovered and any interest or penalty payments
actually paid to third party bodies from Community funds on the basis of the principles of budget univers-
ality and accuracy, as laid down in the Treaty and the Financial Regulation; calls on the Commission to take
action to ensure this;

38.
Considers that the Commission must ensure that the principle of independence regarding the activ-
ities of authorisation, auditing and certification required for directly managed Community expenditure is
also followed for Community expenditure subject to shared responsibility;

39.
Notes that it is not the Commission but the Member States which ensure, in accordance with the
shared management principle, that the same principles regarding the independence of authorisation, audit-
ing and certification are applied to Community expenditure subject to shared responsibility as are applied to
directly managed Community expenditure; notes further that this applies in particular to the establishment
of accredited payment agencies with an internal audit service and the setting-up of independent certifying
bodies for the purposes of Regulation (EC) No 1663/95 (1) for the European Agricultural Guidance and
Guarantee Fund, Guarantee Section (EAGGF-G) and of independent persons or departments within the
meaning of Article 38(1)(f) of Regulation (EC) No 1260/1999 (2) in conjunction with Article 15 of Regula-
tion (EC) No 438/2001 (3);

40.
Considers that recovery should be carried out by public authorities, where the EU budget can finance
the costs of recovery, or else by profit-making entities; considers that, in the latter case, there should of
course be a call for tenders;

41.
Believes that, in all circumstances, the revision of the regulatory framework must ensure that rules of
transparency apply and conflicts of interest are avoided with regard to the motivation, the sums concerned
and the end use of the sums arising from penalty payments, interest payments or recovery of Community
funds;

(1) OJ L 158, 8.7.1995, p. 6.
(2) OJ L 161, 26.6.1999, p. 1.
(3) OJ L 63, 3.3.2001, p. 21.

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The European Public Prosecutor

42.
Recalls the above mentioned judgment of the Court of Justice in Case C-87/01 P Commission v
CEMR, in which the Court found that, from the moment when the enterprise concerned established its
headquarters in a Member State, that implied that the law of that Member State should prevail over the
Commission, given that the supremacy of Community law does not justify a legal interpretation under
which the Commission would prevail over the judge of the Member State concerned;

43.
Considers that the creation of the office of European Public Prosecutor will be a decision of major
importance, since it will facilitate direct access to the national public prosecutor's offices, thus working in
the interests of a more ‘joined-up’ procedure; believes that this should help reduce complexity, since the
result should be a converged use of the European Prosecutor's services; recalls that, while OLAF enjoys
powers of intervention in the context of its inquiries, it does not enjoy judicial powers;

Notes that the project to establish a European Public Prosecutor must be regarded more as a long-
44.
term undertaking, and that, in order to achieve an improvement in the short term, coordination between
Member States' public prosecutors must be central to plans to create added value, reducing OLAF's workload
and protecting the financial interests of the Community;

Instructs its President to forward this resolution to the Council, the Commission, the Court of Justice,

45.
the Court of Auditors, the OLAF Surveillance Committee and OLAF.

*

*

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