1. Introduction
The financial interests of the European Community suffer hundreds of millions of euros annually as a result of intentional subsidy fraud. This is the result of the current annual report of the European Commission for the fight against fraud from July 2007. The statistical evaluation of fraud and irregularities in the agricultural sector even showed an upward trend with 3,249 reported cases. This corresponds to an increase of 3%. However, the total amount affected in agricultural spending in 2006, at €87 million, decreased by 15%. Experts largely agree that the true extent of the damage is significantly higher. Estimates based on assumptions, which are naturally based on the dark field, assume that the extent of the damage is at least 10-20% of the community budget.[2] In absolute figures, this would correspond to a depletion of the EC coffers through fraud and irregularities of around 6-12 billion euros annually. Despite the considerable differences in the estimates of the actual extent, the figures are in any case high enough
to make the statement that fraud in the agricultural sector has traditionally been rife in Europe.
The EU Convention on the Protection of the European Communities' Financial Interests was one of the main legal instruments aimed at improving the protection of the EC budget. The Convention drawn up on the basis of Article K.3 of the Treaty on European Union, on the protection of the European Communities' financial interests (hereafterEU Convention) of July 26, 1995[3] and its three protocols is a legal instrument for combating fraud in the context of the so-called "third pillar".[4] The police and judicial cooperation in criminal matters, which is based on international law, also provided or provides a legal basis for protecting the EC's funds, irrespective of Community anti-fraud measures.
The three additional protocols, which could only be agreed one year after the adoption of the first "fraud convention", were intended to guarantee the uniform criminal liability of corruption of Community and Member State officials, to criminalize money laundering[5] and to provide for the liability of legal persons.[6] The Third Protocol, based on Article K.3 of the Treaty on European Union, concerns the interpretation by the Court of Justice of the European Communities, by way of preliminary rulings, of the Convention on the protection of the European Communities' financial interests.
The aim of the EU Convention was to oblige the signatory states to take appropriate measures to implement the standardized European fraud definition in their domestic law, as set out in Article 1 (1) of the Convention.The EU Convention on the Protection of the European Communities' Financial Interests and its First Protocol entered into force on October 17, 2002.
2. Deficiencies of legal acts based on the "third pillar"
The EU Convention of 26 July 1995 did not bring the hoped-for significant progress, which is mainly due to the problem of the hesitant ratification by the member states. The Convention was ratified only very hesitantly by the signatory states, and initially only by Germany on November 24, 1998, Finland (December 18, 1998), Austria (May 21, 1999) and Sweden (June 10, 1999), and later by others, but currently
not yet all member states.[9] The decisive disadvantage of measures to protect the financial interests of the European Communities by means of legal acts under the EU Treaty was that the conventions of the EU Treaty first had to be transposed into national law. For seven years, the convention was nothing more than a "dead letter"[10 ], with the individual states' fraud offences remaining unharmonized.
In addition, difficulties in finding compromises in the Council led to legal acts only being adopted on the basis of the "lowest common denominator"[12][13], so that ultimately, exacerbated by the unanimity requirement[14] in Art. K.4 (3), (1) EUV[15] only a "blunt weapon"[16] remains. In addition, the "third pillar" legal act has proved that, as a result of the requirement for the implementation of conventions, minimal improvements take several years. This seriously sets back the community in the fight against fraud to the detriment of its interests. Not least, it was particularly disillusioning to discover that even if a convention were to be ratified and come into force immediately, it would not be able to ensure the equivalent protection of financial interests that is considered necessary.[18] Finally, there would remain a considerable degree of incompatibility in essential areas of the legal systems of the Member States (for more details, see 4.). [19]
3. Choice of an incorrect legal basis for the EU Agreement
Apart from the practical difficulties of implementation, it should not go unmentioned that the EU Agreement –
as can be seen in retrospect from the rulings of the European Court of Justice (ECJ) of September 13, 2005 ( C-176/03) and October 23, 2007 (C-440/05), the EU Convention should never have been issued on the basis of the "third pillar".
a.) The controversial relationship between the pillars in relation to the fight against fraud
Since anti-fraud measures can be based on both primary law provisions of the Treaty establishing the European Community and enabling acts of the EU Treaty, which include the criminal law protection of EC financial interests, the protection of community finances is referred to as a "typical cross-pillar matter". The argument that criminal law powers are reserved for the European Union (Art. 29, 30, 31 e EU), which was partly advocated in the literature and by the Member States,[20] was vehemently disputed by the literature beforehand.[21] This formulation in the passage standardized in Art. 29 EU (formerly Art. K. 1 EUV) that the objectives of Title VI would be pursued "without prejudice to the powers of the European Community", indicates, according to the preferable latter view, that further-reaching competences of the European Community should not be excluded by the PJCC.[22] In this respect, the existence of competence over the subject matter of criminal law within the community provisions of primary law is also possible. The strict separation of the legal matters of the EU and EC Treaty expressed in this non-affection clause would ultimately also be preserved if one considered separate criminal law community legal acts for the financial interests to be permissible due to the concurrent area of competence. In any case, neither Union law as a whole nor Title VI of the EU Treaty allow the European Community to restrict such a power. [23] If one also takes into account the fact that the purpose of Article 29 EU is to prevent the Union legislature from attempting to control or amend the EC Treaty,[24] the non-affection clause appears to have more of a competence-limiting effect on the "provisions on police and judicial cooperation in criminal matters" themselves. Accordingly, one can only come to the opposite conclusion, namely that ultimately even Community law limits the competences in the area of "police and judicial cooperation in criminal matters". The assumption that the provisions of Title VI of the Treaty on European Union have the effect of limiting the competence for the subject matter of a Community criminal law would, in this respect, amount to a reversal of the actual function of Article 29 EU.
b.) Consequences of the ECJ rulings of September 13, 2005 - C-176/03 (Commission v. Council) and of October 23, 2007 - C-440/05 (Commission v. Council)
This view was confirmed by the ECJ in the judgments of September 13, 2005 - C-176/03 (Commission v Council) [25] and October 23 , 2007 - C-440/05 (Commission v Council ), [26] in which it dealt fundamentally with the demarcation between EU law and EC law, was confirmed.[27] In this decision, the Court stated that if a Community legal basis existed for the matter, the "first pillar" took precedence. Conversely, a "third pillar" legal act is excluded in this case.
The judgment in question was concerned only with the content of Framework Decision 2003/80/JHA on the protection of the environment through criminal law, 28 which the EU used to take coordinated action against the worrying increase in environmental crime. However, the court's findings can easily be applied to the question of the relevant legal basis for the 1995 EU Convention, since the issues were parallel: the ECJ dogmatically justifies this distribution of competences with Articles 47 and 29 EU (formerly Art. K 1 EUV). According to Article 47 EU, the Treaty on European Union shall not affect the provisions of the EC Treaty. The same is apparent from Article 29(1) EU, which introduces Title VI of the EU Treaty. The Court has a duty to ensure that the acts which the Council claims fall within Title VI do not encroach upon the competences
the Community has under the EC Treaty (see Case C-170/96 Commission v Council [1998] ECR I-2763, paragraph 16). According to the statements of the ECJ, it was therefore necessary to examine whether Articles 1 to 7 of Framework Decision 2003/80/JHA affect the competence of the Community under Article 175 EC, insofar as, as the Commission had argued, could have been adopted on the basis of that provision. Ultimately, the ECJ answered this question in the affirmative and stated that the primary purpose of Articles 1 to 7 of the Framework Decision 2003/80/JHA was to protect the environment and that these provisions could have been effectively adopted on the basis of Article 175 EC.
This case law was confirmed by the ECJ in its judgment of October 23, 2007 (Case C-440/05). In its action in Case C-440/05, brought on 8 December 2005, the Commission of the European Communities sought the annulment of Council Framework Decision 2005/667/JHA of 12 July 2005 to strengthen the criminal-law framework for the enforcement of thepollution from ships[29] for annulment. In the action, the Commission argued that Framework Decision 2005/667 had not been adopted on the correct legal basis and that there was therefore an infringement of Article 47 EC. The only legal basis for matters relating to pollution by ships is Article 80(2) of the Treaty establishing the European Community. The ECJ thus ruled in favor of the EC Commission. [30] The Court annulled the framework decision. In fact, the objective and content of the framework decision fall within the competences provided for by the EC Treaty in the context of the common transport policy. Since Articles 2, 3 and 5 of Framework Decision 2005/667 are intended to ensure the effectiveness of the rules adopted in the area of maritime safety, the breach of which may have serious consequences for the environment, and to that end require the Member States to establish criminal penalties for certain conduct, the main purpose of these articles is to improve maritime safety and environmental protection and they could have been validly adopted on the basis of Article 80 (2) EC.
In its judgment of October 23, 2007, the European Court of Justice also commented on the concurrent jurisdiction of the first and third "pillars" , the European Court of Justice commented on this in its judgment of October 23, 2007 and, as expected, reiterated that a legal act may not be based on the EU Treaty if an EC competence exists with regard to the regulated matter.
The same should have applied to the 1995 EU agreement. The deciding factor was that here too it was incumbent upon the EC legislative bodies to first examine whether the EC had jurisdiction over the matter governed by the convention, thereby precluding action within the framework of the EU. It would have emerged from the history and recitals of the 1995 Convention that it was intended to regulate a matter that does not fall within the Community's competence.
It should be recalled that the choice of the legal basis of the EU Convention among the EC institutions was highly controversial. An analysis of the documents relating to the Convention on the Protection of the European Communities' Financial Interests shows that in 1994/95 there were heated discussions between the EC institutions as to whether a first- or third-pillar instrument would be appropriate to ensure uniform criminal liability for fraud. [31] The European Parliament was among those in favor of a solution under Community law. It wanted to enact the homogenous concept of fraud in the form of a directive, whereby it regarded Art. 100a and 209 a ECT cumulatively as adequate legal bases.[32] In its 1995 annual report, the Commission of the European Communities reaffirmed that the choice of an enabling clause in the third pillar for the "Convention on the Protection of the European Communities' Financial Interests" did not necessarily mean that the EC Treaty does not provide a suitable legal basis for the enactment of criminal law acts. [33] It is not impossible that the first pillar – so to speak –" does not provide an adequate solution" [34] for the protection of EC financial interests against fraud. Incidentally, the Commission had also pointed out in retrospect that Community law also contains suitable enabling principles for criminal acts. Accordingly, it had been recognized that provisions affecting criminal law can also be enacted on the basis of the EC Treaty. Ultimately, it would have been essential to examine in detail in advance whether the
of the EC organs, especially since Article K.1 of the Treaty on European Union stipulates that the organs are obliged to exploit the existing community competences before the VI. Title of the EU Treaty is invoked. 35] Only if this question had been explicitly answered in the negative would it have been allowed to take the route via the VI. Title VI of the Treaty on European Union, because only in this case would the principle it established of the obligation to use the legal bases of Community law not have been violated.
In 1995, there was still no specific legal basis for the protection of the EC's financial interests, especially since the predecessor of Article 280 280 EGV, Art. 209a EGV, was not to be used as a basis for empowerment.[36] However, this did not mean that the European Community's legislative initiatives to protect its financial interests were doomed to failure and that a community competence in this matter was therefore ruled out. The legal acts for the protection of the Community's financial interests against fraud and irregularities were always based on provisions other than the financial provisions of the EC Treaty. Insofar as it was possible to decide on a procedure against fraudulent activities on the basis of the "first pillar", both the "VO (EC/Euratom) 2988/95"[37] and the "VO 2185/96"[38] Art. 235 EGV[39] as the basis for competence. The judgments of the Court of Justice of September 13, 2005 and October 23, 2007 have therefore subsequently clearly shown that the EU agreement was made on the wrong legal basis.
In its Communication to the European Parliament and the Council on the consequences of the judgment of the Court of Justice in Case C-176/03 Commission v Council,[40] already recognized the follow-up problem that numerous framework decisions with criminal law content that were not reviewed by the ECJ were adopted on the basis of an incorrect enabling provision. The 1995 EU Convention is also among these. The EC Commission has already announced that it will, as far as possible, rectify the situation quickly by inserting the correct legal bases. In addition, on November 23, 2005, the Commission decided to bring an action before the Court of Justice for annulment of Council Framework Decision 2005/667/JHA of July 12, 2005. This is the only case in which the procedural deadline allowed the Commission to bring an action for annulment.
4. Would making the EU Convention into a Community matter provide real protection for the EC budget?
The authorization basis of Art. 280 IV EC, which was inserted by the Treaty of Amsterdam, is associated with the hope of using this provision to communitize the "Convention on the Protection of the European Communities' Financial Interests" including its additional protocols. [41] Attempts to do so have already been made.[42] In view of the fact that the deficiencies in the national legal systems favored criminal machinations, the Commission had included all of the provisions of the convention and the additional protocols in a draft directive, with the exception of the criminal procedural regulations.The Council did not adopt this proposal, even in a revised version dated October 16, 2002.
Art. 280 IV 1 of the EC Treaty now allows the Council, acting in accordance with the procedure referred to in Article 251, after consulting the Court of Auditors, to take the necessary measures to prevent and combat fraudfraud affecting the financial interests of the Community. Art. 280 IV 2 of the EC Treaty then states: "[...] The application of the criminal law and the administration of justice of the Member States shall not be affected by these measures ."[45]
the wording of Article 280 (4) EC, the EC institutions are granted a wide scope for action, which apparently makes it possible for them in the future to justify the adoption of criminal Community legal acts that are associated with social disapproval if necessary. The EC legislative bodies have a prerogative of assessment as to how they wish to ensure the two objectives of the competence basis, namely the effective and equivalent protection of the EC's financial interests.
However, no far-reaching hopes for the effective protection of the EC's financial interests can be associated with this. If the institutions of the European Community were now to decide, following the introduction of Article 280 EC, to issue guidelines to ensure equivalent protection of the Community budget under criminal law on the basis of this standard and to transpose the anti-fraudIf the EC were now to decide to issue guidelines to ensure equivalent criminal law protection of the community budget on the basis of this standard and to this end to transpose the fraud prevention convention of the "third pillar" to community law, then this would admittedly be a viable way to combat the partial lack of political will of the member states to promote the harmonization of their own criminal law. In this case, it would at least be possible to force the EC states to implement the Community legal order by initiating infringement proceedings under Art. 226 EC et seq. to transform the secondary-law guidelines for the uniform criminal liability of EC fraud into their national laws. In comparison to the EC Treaty, the EU Treaty does not provide for any infringement proceedings in the sense of Article 226 EC for the PJCC.
The reluctance of Member States to implement the Convention on the Protection of the European Communities' Financial Interests, including its three additional protocols, has vividly demonstrated that the enthusiasm of Member States to modify their national criminal laws is limited. However, it would be unrealistic to expect that the Member States would now change their attitude towards reforming their criminal codes in response to a directive, one of the forms of Community legislation. However, hopes that the Member States might change their willingness to cooperate by resorting to the first "pillar" form of action because of the possibility of the Commission initiating infringement proceedings to discipline the Member States must be realistic. In the past, infringement proceedings have had little deterrent effect on Member States refusing to transpose directives into national law.[46] Furthermore, a conviction of a state does not yet ensure the removal of the infringement.[47] Through the financial sanctions provided for in Art. 228 II UA 3 S. 2 EG[48] vorgesehenen finanziellen Sanktionen wie Pauschalbeträge sowie Zwangsgelder könnten die Mitgliedstaaten nunmehr zwar eher dazu gezwungen werden, das gemeinschaftsrechtswidrige Verhalten zu beenden, da finanzielle Konsequenzen drohen.[49] However, such "punitive measures" by the Community against Member States can only be imposed in the course of a so-called "secondary proceedings". This is a very lengthy and cumbersome procedure.Furthermore, it seems very doubtful whether the "pressure" of an action before the European Court of Justice can increase the sensitivity of the Member States to the protection of the financial interests of the EC and thus make the fight against fraud more serious. Experience shows that this will not be the case. The literature rightly points out that the cooperation of the Member States in enforcing Community law can be ensured more by "consensus and compromise"[51] than by sanctions.
The lack of support on the part of the Member States, reflected in their lack of will to implement anti-fraud legislation, is only one problem in terms of the effective protection of Community finances. But even if one were to assume the success of the attempts to transpose the EU "third pillar" convention into Community law, a significant and more fundamental obstacle to the criminal law protection of the general budget of the European Communities would remain: From a realistic point of view, isolated legal harmonization measures cannot prevent the inconsistent punishment of fraudsters, since the punishability of a person is still influenced by general rules and criminal procedural laws, which are highly diverse.[53] On the other hand, the goal of equal sanctioning is jeopardized by the fact that the EC states, with
sufficient leeway for implementation, they can decide for themselves how to comply with the directive. 54] After all, directives are only binding on the member states as regards the result to be achieved (Art. 249 (3) EC).
5. Conclusion
The great expectations placed in the EU Convention in 1995 have not been fulfilled. On the contrary: initially, the legal act on police and judicial cooperation in criminal matters for the protection of the EC's financial interests was unable to take effect for a long time due to the hesitant ratification. An effective fight against fraud and economic and financial crime is long in coming, so that progress is a distant prospect, which is unacceptable given the financial damage this causes the community. Furthermore, it is clear from the ECJ rulings of September 13, 2005 and October 23, 2007, which can be applied to the financial interests of the EC,[55] that the EU Convention should never have been issued on the basis of intergovernmental cooperation of the EU Treaty,because the Community competences for the protection of the EC budget are or were applicable as a matter of priority. This shows that the "third pillar" is in a very difficult position and is decisively weakened in the area of criminal law for the time being . Communitization of the legal act could be carried out via Art. 280 IV ECT. However, harmonization efforts are no panacea for effectively combating fraud. One only has to think of the equally problematic and time-consuming implementation of a directive and the often lack of willingness to cooperate on the part of the Member States. The Member States cannot effectively ensure the protection of the EC's financial interests in the long term through their penal codes. Overall, the choice of the legal form of the directive for the selective approximation of the national criminal laws against EC fraudsters must be described as completely inadequate. Further time must not be lost: if the European Community does not want to lose even more credibility as a result of the enormous extent of the damage caused, the EC budget must – at long last – be effectively protected. To get the situation under control and to put an end to the high criminal appeal of this area, consideration must also be given to measures under criminal law for deterrence purposes. The damage caused annually by fraud and irregularities at the expense of the financial interests of the communities is immense, as the 2006 Annual Report of the Commission of the European Communities on Fraud Prevention has recently shown. [56] Following this line of argument, the "Draft Treaty Amending the Treaty on European Union and the Treaty Establishing the European Community of October 7, 2007", which was submitted to the intergovernmental conference, for the first time included a supranational criminal law competence for the protection of the EC's financial interests. Behind the seemingly unremarkable wording of Article 280 EC,"In paragraph 4, the last sentence shall be deleted," the EC's own sector-specific criminal jurisdiction is now hidden.The former immunity clause in Art. 280 IV 2 EC, which was partly understood as an assurance of a monopoly on criminal law to the Member States, no longer appears in the new version of the original Art. 280 IV EC, Art. 325 of the Treaty on the Functioning of the European Union (TFEU) in the version of the Treaty of Lisbon. The Lisbon Treaty, if ratified, would therefore have significant consequences for the effectiveness of the EC budget's protection against fraud. It remains to be seen whether the EC will in future make use of the original criminal law competence conferred on it. The discussion in European criminal law will therefore be determined in the future by whether the enactment of effective, directly applicable criminal law provisions by way of EC regulations is within the scope of competence.[59]
The statements represent initial information that was current for the law applicable in Germany at the time of initial publication. The legal situation may have changed since then. Furthermore, the information provided cannot replace individual advice on a specific matter. Please contact us for this purpose.