4
Evidence Session No. 2 Heard in Public Questions 14 - 33
Members present
Lord Anderson of Swansea
Lord Dykes
Viscount Eccles
Baroness Eccles of Moulton
Lord Elystan-Morgan
Lord Hodgson of Astley Abbots
Baroness Liddell of Coatdyke
Baroness O’Loan
Lord Rowlands
Lord Stoneham of Droxford
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James MacGuill, Chairman, Criminal Law Committee, Council of Bars and Law Societies of Europe, Dr Anna Bradshaw, Member of the Law Society’s EU Committee, and Mike Kennedy, former President of Eurojust and former Chief Operating Officer, Crown Prosecution Service
Q14 The Chairman: Good afternoon and welcome. This is the second evidence session in our inquiry into the proposals for a European Public Prosecutor’s Office. We are looking today at the impact on non-participating member states. It is a pleasure to welcome the three people who are going to be giving evidence, today. We have Mr James MacGuill, who is the chairman of the Criminal Law Committee, of the Council of Bars and Law Societies of Europe, Dr Anna Bradshaw, who is a member of the Law Society’s European Union Committee, and Mr Mike Kennedy, who is the former president of Eurojust and former chief operating officer for the Crown Prosecution Service. Thank you very much for giving your time to come to see us today.
The session is open to the public. A webcast of the session goes out live, as an audio transmission, and is subsequently accessible via the parliamentary website. We will take a verbatim transcript of your evidence, which will also be put on the parliamentary website. A few days after this session, you will receive a copy of the transcript, which we would be grateful if you would check for accuracy. We would also be grateful if you could advise us of any corrections as quickly as possible. If, after the session, you wish to clarify or amplify any points you have made during evidence, or if you wish to make additional points, you can submit supplementary written evidence to us. I do not know whether you would like to each make a brief personal introduction before we take evidence.
James MacGuill: Thank you very much, Baroness. By way of introduction, I am chair of the Criminal Law Committee of the CCBE, which represents approximately a million practising lawyers in the European Union. As you might guess, I am Irish, so I have a keen understanding of the unique position both the United Kingdom and Ireland have, in relation to criminal justice matters within the European Union. We hope over the course of this afternoon to assist you in your deliberations, focusing mainly on the practical aspects of the prosecution system as envisaged. If there is anything we can to do assist, and if there are follow-up submissions you would like, the organisation are very anxious to assist you in any way we can.
Dr Bradshaw: Where James can provide the European dimension, I will look purely at the implications for England and Wales. Likewise, I am happy to follow up if the Committee has any further questions following today’s session.
Mike Kennedy: As you have said, I am Mike Kennedy. I was the president of Eurojust and the UK national member, between 2002 and 2007, after which, I became the chief operating officer for the Crown Prosecution Service for five years. I left at the end of 2012. For the past three or four years, I have been a member of the European Commission’s expert group on criminal policy.
Q15 The Chairman: Thank you very much. You may know that this Committee conducted an inquiry and published a report on fraud on the European Union’s finances some time ago. In it, we concluded that in some member states, the relevant authorities are not terribly enthusiastic about pursuing crimes against the European Union’s financial interests. Do you share that view? By the way, you do not all have to answer each question if you do not want to. Between you, respond as you think appropriate.
James MacGuill: Since the European Public Prosecutor proposal has been first discussed, it appears, to us at least, that the Commission have had a rethink in relation to the scale in which there is underprosecution of fraud and other offences against the financial integrity of the European Union. It would appear that individual member states did not understand the questions that were asked, or at least did not give complete answers. Therefore the Commission, I suspect, are taken aback by the amount of prosecution that actually is taking place. That is not to take away from your own findings that there is under‑prosecution, but it is perhaps not on the scale that was previously presumed to be the position.
That, of course, feeds into a concern that we have that the present proposal would assume immediate and exclusive jurisdiction over all prosecution across those states that are participating, in relation to all crime and ancillary offences.We will talk on that later on today. We think it is extremely dangerous that the prosecutor would take on such an ambitious workload, perhaps based on information that was neither complete nor accurate, and potentially misunderstood. The prosecutor could therefore be strangled at birth by taking on an entirely excessive, unmanageable workload.
Mike Kennedy: I am not sure “unenthusiastic” is entirely the right word, but my experience was that, comparing prosecuting investigating authorities across the member states, with the 27, 28 or 29 different systems, there are varying degrees of effectiveness and efficiency. It is very difficult to compare them, because there has been no study on this. These cases can be quite difficult to investigate. They can require a lot of resource, expertise and skill. Frequently, they involve cross-border investigation to gather that evidence, and difficult decisions about where the prosecution might take place.
During my time as president of Eurojust, we had a relationship with OLAF. One of the constant complaints of the then director of OLAF was that some member states were reluctant to take forward the administrative investigations that his staff had completed and convert those into criminal investigations and criminal prosecutions. That said, during my time there, there were not many referrals by OLAF, who do not have that capacity themselves to investigate criminally or prosecute criminally. There were referrals, but not many referrals, for Eurojust to use its powers to make requests to the member states to investigate or prosecute particular criminality that had been discovered.
As you will know, there is no capacity for Eurojust to direct. The request has to be followed up by explanatory reasoning, if the answer is no. There were only really a handful of cases. Often those cases referred to Eurojust during the time I was there were cases that were relatively stale and quite difficult to resurrect, as it were. I would not use the word “unenthusiastic”. There is much of a capacity and ability involved. A lot of the thinking by the Commission in the proposal for the EPPO is around capacity and ability. The proposal tries to plug a lot of those gaps.
Dr Bradshaw: The Law Society of England and Wales is not in a position to verify whether it is indeed the case that there is a lack of enthusiasm in other member states. Our impression is that there is no lack of enthusiasm in this country. What we struggle with is the idea that a European Public Prosecutor will be the solution to this problem. It will certainly result in more investigations and more prosecutions, but will those investigations and prosecutions necessarily translate into more convictions and more recoveries? We think not.
Q16 The Chairman: When we conducted our inquiry, we found that the Commission’s official figure for fraud on the European Union’s budget for 2011 was €404 million. We extrapolated from UK figures for fraud on the public purse, and we suggest that the actual figure was closer to €5 billion. Is that a credible figure? I am a bit confused. There is a suggestion that there are a lot of prosecutions going on, but in many ways they are not pursued.
James MacGuill: The various arguments that are being put forward are, to say the least, a little unconvincing. Unfortunately, there is an enthusiasm for the prosecution project that perhaps strips the people presenting it of the capacity to actually drill down and look at the figures in a critical fashion. One of the points that we would like to make is that it is not necessary, whether it is €5 million or €5 billion, to take on the responsibility of prosecuting all of this crime, by one body, right from the get-go.
We suggested three alternatives that might commend themselves to your Committee. The first is to say that the prosecutor should have the jurisdiction to prosecute only in cases where an individual member state proves itself to be unwilling or unable to prosecute itself. That is a well understood test in international law. It is the test that applies, for instance, to the International Criminal Court. An alternative would be to say that if it is in fact the position that there are these colossal frauds being perpetrated routinely within the European Union, there should be a de minimis. The prosecutor should only get involved in cases where the fraud is in excess of €1 million, just to take a figure. It could be lesser or greater.
The final alternative, which perhaps has the greatest flexibility, is that the prosecutor should have an overall entitlement to intervene in any given case. It might be a large case or a small case and there might be policy reasons for it. But the prosecutor would be selective and would only pick the cases where there was a real benefit in prosecuting it with European-wide powers. Unfortunately, the way the measure currently is, for those states that buy into it, the entitlement to prosecute at a domestic level will go overnight. It will be subsumed into an under-resourced European prosecutor who could be tasked with prosecuting trivial, domestic offences, simply because they impinge on the financial integrity of the Union.
Q17 Lord Hodgson of Astley Abbotts: Going back to Mr Kennedy’s question of will and your point about resource, the OLAF written evidence says it would consist only of a small central structure. European delegated prosecutors located in the member states would generally conduct investigations and prosecutions. Is it realistic that those people in the states will not “go native”, so to speak? They will become prisoners of the environment in which they are operating. That is allegedly the problem now.
Mike Kennedy: I am not sure how small “small” would be. It would need to be of a reasonable size to be able to monitor what was going on in 10, 12 or even 20 member states who were taking part in the project. I would expect that the people on the ground, running the investigations and prosecutions in each of those member states, will, to a very large extent, be nationals of that country. They will need to know the system; they will need to speak the language; so they will be able to deal with all the documentation. It is possible that one of the designated prosecutors for a particular country might not be a national of that country.
My experience of managing large cases at a distance is that one does need to have a pretty robust system in place with a reasonable amount of support, to be able to monitor what is going on in terms of the quality of the investigation, the shape of the investigation, the subsequent prosecution and of course the spend on it. I would not like to say how large it would need to be. That would depend on the number of member states that are taking part in this. It would need to be something that is relatively robust. It might not need to be enormous. One would hope that it would be very focused on a series of objectives and criteria, to be able to deliver effective prosecutions.
Q18 Lord Rowlands: Can we take it from your statements that you share this Committee’s view that the EPPO proposal by the Commission has in fact offended the principle of subsidiarity?
James MacGuill: I know that you discussed this at some length on the last occasion with the two academic people presenting. I would agree with what they said; I think that competence is clearly there. There is clearly legal competence and the treaty is absolutely clear about that. Is the issue of subsidiarity satisfied? That is very much an open question. We would be more comfortable if it was confined to a limited number of difficult, genuinely transnational cases, where you could make the argument that there had to be an overreach across a number of jurisdictions, and the need was clearly there. The case would be much harder to argue where it is purely domestic crime being prosecuted by this new body. I do understand the difficulty you have with subsidiarity and, on a personal level, I would agree with it.
Dr Bradshaw: The Law Society is in a very, very similar position. Professor Mitsilegas, at last week’s evidence session, compared the project to what happens in the UK with the Serious Fraud Office. While I see the merits of that comparison, I do not see anything in the proposal that convinces me that the European Public Prosecutor’s Office will have the necessary expertise to conduct these cases.
Lord Rowlands: Does this whole thing about the EPPO not suffer from the grandiose nature of its title? In fact, it is, frankly, a beefed-up specialist fraud agency, in its concept. Is it the title that is actually driving everybody mad?
James MacGuill: If one was being cruel, Lord Rowlands, one would say it is not beefed-up at all, because it is effectively being done on the cheap. What they propose to do is have a series of people in place, but for the work to be done at a domestic level. A core value that we would see, as lawyers, would be that a prosecutor must be independent. The idea that you would have a European Public Prosecutor subcontracting work to somebody in a domestic prosecuting authority has to create a huge potential conflict of interest for the person seconded to the EPPO but still working in their domestic prosecuting office. There would be different tests for the acquisition and admissibility of evidence. How do you un‑see something in your domestic capacity that you saw in your European capacity? Clearly, because the finances are not being made available to them, important corners are being cut and principle is being sacrificed in a very dangerous way.
Mike Kennedy: I am not so sure I would fully agree with that. It might be possible for a series of offices to be set up to deal with all these cases. It might be possible for them to vet certain of the more straightforward cases, and have them dealt with on an agency basis by prosecutors who are employed by the local national prosecution service, and reserving for the EPPO, in each member state, those more complicated cases. There would have to be fairly robust measures in place to ensure that that was supervised properly and that the action was monitored properly, but I think it might serve as a way of dealing with all these cases within the EPPO.
You are right that there is a certain fear that the European Public Prosecutor, or the suggestion of it, if not the threat of it, has been around with us now for many, many years. Now that is has come to fruition, when one looks at it, it is not anything like the size of any of the national prosecution services. I suspect it would be very similar to a small prosecuting agency, if it was to exist within the UK, something similar, as we were saying, to the Serious Fraud Office.
Q19 Lord Dykes: We took evidence from Professor Ligeti from Luxembourg University, who stated in her remarks that the offences against the financial interests of the EU typically have a strong, cross-border dimension. What problems would you experience when dealing with these types of crime? Are the existing EU agencies, such as Eurojust and OLAF, effective at investigating and combating these crimes? Is the proposed EPPO the solution? Perhaps I could ask Dr Bradshaw to start off on this.
Dr Bradshaw: Cross-border cases typically, in practice, will raise two problems. The first is mutual legal assistance. Mutual legal assistance can work incredibly well in some cases, and in other cases you have hiccups. Above all, the main hiccup tends to be delay. The Law Society’s position is that there are instruments in place, and there are future instruments in the pipeline, such as the European Investigation Order, which continually improve the functioning of mutual legal assistance. Eurojust plays a valuable role. In terms of problems that cross-border cases can cause in practice, the mutual legal assistance problem is not insurmountable. We would not see a European Public Prosecutor as the solution.
The second problem is conflicts of jurisdiction. Here, again, the Law Society would not see the European Public Prosecutor as the solution. In fact, it fears that the European Public Prosecutor’s Office might increase conflicts of jurisdiction, if you look at the breadth of its proposed jurisdiction.
Mike Kennedy: I agree with Professor Ligeti that many of these cases have a cross-border element. It is not just cross-border within the European Union. As I am sure you know, the European funding is often applied to states outside the European Union. The European Union is spending lots of money in the Balkans, for example. I have just been working on a project that they are funding in Turkey. If there is corruption in relation to funding, for whatever it might be, it could be that one is dealing with several states with the Union, states outside the Union and even the United States and Canada. In fact, the EU, again, is funding some work in the Caribbean. There are all sorts of elements involved.
They are difficult cases to deal with. There are international measures for mutual legal assistance. As Dr Bradshaw has said, we have the European Investigation Order, which is almost completed and agreed. But MLA is very slow. It can often involve quite sensitive evidence, particularly banking evidence, and often from offshore banking regimes where it can be quite difficult to obtain that evidence quickly.
Some of the cases that we dealt with when I was at Eurojust involved so-called MTIC fraud—missing trader intra-community fraud—or VAT carousel fraud. Typically, often many millions of pounds were being shifted around the European Union to the Gulf states or to other offshore banking centres in the Caribbean. It is a huge task to trace and keep up with that movement and the speed of that movement. To actually get evidence is often a huge task. Frequently, it can involve countries that do not have formal relations with an individual member state. One of the advantages of an EPPO might be that they would have more clout and would be able to persuade some of these states that were not perhaps co-operating to co-operate.
There are a lot of potential advantages of the EPPO, particularly relating to those countries that do not have the capacity themselves to make these sorts of investigations effectively. Countries such as our own have very robust, well developed relationships with other jurisdictions and can get that evidence fairly quickly. Some of the other particularly smaller member states, or newer member states, do have significant problems in that area. They would benefit from the EPPO.
Q20 Lord Dykes: Naturally, third countries, particularly those of a federal nature, such as the United States, Canada and so on, would prefer probably to deal with one central office, which would itself then supply the underlying co-ordination for any of the national intrusions that might occur in the course of the investigation.
Mike Kennedy: That is very true. In fact—it is not quite on the point—when I was at Eurojust, we worked closely with the United States. They were so interested in what we were doing, in terms of collaboration and co-operation, that they sent somebody to work permanently at Eurojust. They were there for three days a week, to take advantage of co-operation and help with US cases.
James MacGuill: One of the most strongly held criticisms of the proposal is that, while everybody accepts that it is desirable that there should be powers in terms of obtaining evidence that go across the borders of the Union and feed into the third‑country example Mr Kennedy has just given you, the proposal is at pains to try to avoid a transnational character for the prosecutor itself, deeming each prosecutor to be a national authority within their own state, to immunise them from meaningful judicial review by any European court. That was criticised in very strong language. The word used was “deplore”, in the meeting of the parliamentarians last month, where they felt that the absence of a suitable oversight from a European court structure is a serious drawback. You simply cannot be giving people new powers and allowing them to avoid all the responsibilities that should come with it.
We would feel that there would be a very big danger that if powers are conferred without oversight, there will be differential development of those powers. There will not be a standardising use of them; there will not be procedural safeguards recognised on an equal basis in each country. That will create an irresistible temptation for forum shopping. Unfortunately, there would be selection in terms of the most convenient venue for prosecuting authorities, where the most dilute safeguards are applied. That would do terrible damage to the rule of law in the Union.
Dr Bradshaw: If I can add to that, the Law Society would concur with those concerns. We would also be particularly concerned about the prospect of the European Public Prosecutor entering into transactions with suspects. What is troubling with the proposal as it is currently drafted is that the rules and procedures for such transactions, which are effectively a form of plea-bargaining, would be left entirely to the EPPO. We would prefer that, if such a scheme was going to be introduced, there would be far more detail in the proposal itself about how those rules and procedures would work.
Q21 Lord Elystan-Morgan: There is a general question that I have been dying to ask for some time. It is germane to the issue, and it is this: we are in early days, at the moment, in relation to this question, and there are so many massive questions that remain unanswered. Would it help, rather than hinder, to think first of all in terms not of the mechanics, details and the institutional issues involved, but of a package of these principles? First, one is dealing here not with an administrative problem, but with a judicial problem, which must be governed essentially by international understanding of the rule of law. Secondly, there cannot be any real practical possibility of success until somebody can authoritatively decide the scale of the problem. Lord Chairman, you have already pointed out how the estimate varied from €500 million to €5 billion, or something of that order. That is a huge multiplier. Thirdly, there are many, many alternatives, but whatever is arrived at must be a solution that can very speedily and practically be put into effect. Lastly, whatever is done should not overtly militate against the principle of subsidiarity. That is a lot. One should see that as a backcloth and a template, as it were, to everything that is done from now on. Does that make sense?
Mike Kennedy: Yes. It is very difficult. There has been an acceptance within the Commission and OLAF for some time that this is a big issue and a big problem. The size of it may have been underestimated. I have been surprised when it has been mentioned as £400 million. I would have thought it was more than that. I have not looked at the detailed workings that have reached the €5 billion figure, but 10 times the difference is quite a lot. These big carousel frauds do involve an awful lot of money. I am not surprised to see that figure as one that has come out. There is a real need to do something about this. Some member states, I am afraid, are not doing it very effectively. That is why the European Union is where it is.
We have not mentioned this, but the solution offers potentially improved investigation and prosecution, by focusing on this work, devoting resource to it and hopefully managing it well from the centre. It also adds a series of measures within the draft regulation to improve the capacity of investigators, and the quality of support and service, as it were, to potential suspects and defendants. That will ramp up the quality of the criminal justice systems in a number of countries, provided they meet those requirements.
There are advantages on both sides of this. One should not overlook the provisions in Article 26 that will be of huge benefit to defendants. I am sure you are aware of the article. Something really does need to be done in some member states. Although I am not in favour and I do not think we need one here, there could be some real benefits in some countries, provided it is properly run and managed.
Q22 Lord Anderson of Swansea: I do not know whether Mr Kennedy was perhaps over-optimistic in saying that one result of the project will be that there will be more clout in respect of applications of assistance from third parties. That obviously must depend on the way the organisation beds down and the resources available to it. Would you agree that this may be relevant, in terms of clout, for smaller countries, but much less relevant in England and Wales? I cannot imagine, for example, that the US will be more ready to reply fully to a request from a European prosecutor than to an England and Wales prosecutor. Ancillary to that, you expressed a certain personal scepticism about the project. I wonder if that is shared by the large number of practitioners who you represent.
Mike Kennedy: In terms of clout, yes, I am sure you are right. The smaller countries making requests to third states often find that they do not have the clout. I have experience of investigations from very large countries within the European Union, which have not drawn the desired result when that request was made by the national authority.
Lord Anderson of Swansea: Are you confident that an EPP would solve that problem?
Mike Kennedy: I am confident that it would be better-placed to solve that problem than a smaller member state. When I was president of Eurojust, a particularly large member state wanted some co-operation from a state in the Middle East. The director of that particular organisation was not getting the response. He asked me to write, effectively on behalf of the member states of the EU, and it did produce some co-operation. It does work, but your general point is right: smaller countries have less clout than larger countries. Countries club together, as it were; as part of the European Public Prosecutor, they would have more clout as a conglomerate than as an individual.
James MacGuill: I agree with Lord Anderson’s observations. My scepticism is muted, compared to some of the scepticism expressed by colleagues from the European Union. This has to be borne in mind against the backdrop of the experience we have had as defence practitioners, with criminal law measures, particularly the European arrest warrant, which was legislated in haste. Concerns on the part of practising lawyers were simply ignored. Everyone is paying the price now, with an instrument that is neither fit for purpose nor capable of easy amendment, because to do so would reopen the whole negotiations. We were promised at the time that there would be measures brought in to counter-balance the additional powers conferred on the prosecuting authorities, by measures of procedural safeguards from the defence. 10 years on, we still have not got those. We are muted in our scepticism. Other people who are dealing with cases of this kind can see serious problems not being addressed, simply because of the political expediency saying, “It would be nice to have this measure on the statute book”.
I will send to you, Baroness, the written materials that we have generated before, so that Lord Anderson will not feel that I am running away by myself on this. Practitioners are terrified of this, because it is going to confer colossal, overbearing powers on this new prosecuting authority with nothing put in place to address procedural safeguards and nothing put in place to provide for dual representation, which is vitally important. If you are going to have investigations run in tandem, in several jurisdictions, you need representation in all of those jurisdictions.
It is entirely silent on the issue of legal aid. Dr Bradshaw made this point. We are very uncomfortable with the transaction point—rich man’s justice. The person that can afford to enter into a settlement with the EPPO will deal with it on a financial basis. The person who cannot is likely to find themselves imprisoned and without proper representation or legal aid. I am glad that you picked up on my scepticism, because it gives me the opportunity to say that my views are mild, compared to the views of others.
Lord Anderson of Swansea: Do the Republic of Ireland Government share the views of the UK Government in this respect?
James MacGuill: I think that we are reluctant consumers of the European criminal justice package of measures. Recently, we have opted into some of the procedural safeguards and we may yet opt into Measure C. There would be more scepticism in government than you have heard from me in relation to this measure. I do not think we are ready for it, yet. That is not to say that if it was recalibrated, there are not good things in this measure. The one issue I would have taken with Lord Elystan-Morgan is the second part of your four principles. I do not think we will ever establish the scale of the problem until we have fit-for-purpose methods of prosecuting the crime. Clearly, everybody would like to see that done if it is done in a fair way, striking a fair balance between the authority and the citizen.
The Chairman: I have a number of colleagues who want to follow up on this point. Lord Hodgson.
Q23 Lord Hodgson of Astley Abbotts: I want to ask more about scale. I understand the fraud bit, but when I read the Europol evidence, we come across this thing called PIF, which, to my shame, I have not come across before. If Europol is right, PIF is yet to be defined. So, we have a type of crime, for which we are setting up a prosecutor, for which we have not yet got a definition. The Europol mandate lists the following for PIF: swindling and fraud; corruption; forgery of administrative documents and trafficking therein; illegal money‑laundering; and forgery of money and means of payment. These are all serious crimes, but that is a big, big, list. This is not just fraud against the EU budget. To take on all that is a stupendous task.
Mike Kennedy: That is right. In terms of protection against financial interest—the PIF cases—the draft suggests it could be anything linked to fraud against the European budget, which is what PIF is, effectively, and corruption, money-laundering and forgery of the euro. All these potential offences, provided they are linked to the European budget, would be covered.
Dr Bradshaw: If I can add to that, not only is the PIF category enormous, but if the EPPO is to have jurisdiction over ancillary offences as well, then the category becomes huge.
Baroness O'Loan: It seems to me that you are describing a catch-22 situation. You have identified significant scope, and so has this Committee, for fraud in the European Union. You have identified ongoing failure to sign off the accounts of the European Commission, which is in some way related to this issue, and the limited enthusiasm for prosecutions and investigations to which the Lord Chairman referred. If we put that into context, and given the scope, as Lord Hodgson so graphically illustrated, of the work, I ask myself if it would be possible to manage the budget and to protect it from fraud under the current proposals. Will it be possible? Will it not be possible? My question is: is the job too big, despite the fact that it needs to be done, especially when there are seven or eight states not participating?
Mike Kennedy: It is a big job. There is no doubt about that. It is an enormous and challenging task. This solution, as it were, should be seen as only part of the solution. The granting of EU funding to member states, either individuals or government departments or whatever, outside of the European Union, is quite a complex process. It needs to be made more fraud-proof, upstream. That should be part of the solution. There should be a certainty, to ensure that criminals have a clear idea that they will be investigated robustly and they will be prosecuted robustly. That must be part of the ultimate solution, if they do manage to obtain these funds criminally.
Baroness O'Loan: Would it be your view that at the present time criminals are fairly sure that they will not be investigated, robustly or otherwise?
Mike Kennedy: I do not know any criminals, so I cannot really answer that. There are a number of cases that have been quoted quite widely by the director of OLAF, where there have been similar cases prosecuted in different jurisdictions, where some have been convicted and others have been acquitted. I suspect that in the countries where they have been acquitted, the criminals might be thinking, “Well, we stand a better chance if we get involved in our crimes against the budget in this country, rather than doing it across the border in this other country”. So, yes, I suspect so.
Q24 Viscount Eccles: Can I ask a question about linkages? If it is a fraud against the European Union, how often will it be only a fraud against the European Union and not also a fraud against somebody else, either a nation state member or an outside state? If we think about financing projects in the Caribbean, they will be jointly financed with somebody else, for example. How extensive would the linkages be? If we go back to minimal cases being left with member states, how easy would it be to draw some sort of line, which said, “This is in the remit of the prosecutor and this is not”?
James MacGuill: That is one of the real difficulties with the lack of precision in the definitions. It is difficult to conceive of a single crime that would not amount to money‑laundering. If you take the definition of proceeds of crime in the directives, it is so broad. If there is a fraud committed against the financial interests of the European Union, those that have either advised how to commit the fraud, have given assistance after the event or who have handled the funds will all have committed offences that will be domestic offences.
Depending on how the ancillary-crime bit develops, you could actually find that domestic authorities would lose the capacity to prosecute that, because the European prosecutor could come in and say, “I am taking over all that responsibility”. That is why we think that it would be far better that all these offences remained domestic until something happens at the hand of the prosecutor. The prosecutor could say to the court in Paris, “We do not believe that you are able or willing to prosecute this crime”, or, “We will say that this is a crime so big, that it must be dealt with at a European level”, or, “This is a unique type of fraud. No one member state has the capacity to prosecute it, because the criminals are ahead of the game and we need to use all our resources to show how to prosecute it”, so domestic authorities can deal with it.
The concern— Baroness O’Loan knows this perfectly well from her former life—is that the damage that would be done if there appears to be overzealous prosecution, divorced from the rule of law, is going to be far more inimical to the European Union than the financial losses that it is calculated to address.
Q25 Lord Stoneham of Droxford: Obviously we are not opting in to the proposed EPPO. The director‑general of OLAF says that this will not affect our judicial system in any way. Do you agree? If you do not agree, and believe that there will be some impact, could you say what you think it would be?
James MacGuill: I will defer to Dr Bradshaw.
Dr Bradshaw: It is quite early days yet. If the width of the EPPO’s jurisdiction remains as it is in the proposal, then we would have persons in the UK at risk of being at the receiving end of an extradition request or mutual legal assistance request by the EPPO. Any challenges to such requests would be heard by the UK courts. We do not believe that there is any particular reason why a challenge to a request by the EPPO would have a greater chance of being successful than a challenge to a request by a national authority. This will depend entirely on what the final draft of the regulation looks like.
Lord Dykes: May I just come back quickly to what Mr James MacGuill earlier on? Referring to previous evidence we have had about Article 86 of the treaty, it was specified there that the procedure from once a trial begins would be conducted in the national courts or according to national law. The supranational EPPO would dock into the national system through the delegates, who are part of the national administration of criminal justice. So the delegates of the EPPO in the proposal are foreseen to be part of a single office but, at the same time, part of the national administration of justice. Would that not be a perfectly rational way of dealing with it? Would it cause tremendous confusion?
James MacGuill: I think it is the inverse; it is giving the prosecutor the best of both worlds. When they want to investigate, the powers range across the borders. But when you want to hold them to account, they are deemed to be purely national. So, for argument’s sake, the court in Paris is told, “One part of 70 issues in this prosecution took part in the Republic of France. You should not be trying this case. It should be tried in Germany, where the other 69 parts took place”. The French court makes that decision. That is a bad place to be. There should be judicial review, where you can go to a court in Luxembourg or elsewhere, to say, “Applying fairness, where is the proper place for this to be tried? Applying fairness, what are the admissibility rules in relation to evidence?”
In our belief, you should have a double lock. The prosecutor should only be allowed to use evidence in France, obtained in Germany, if it would be admissible both in Germany and in France. They cannot take evidence that is inadmissible in the country, and pick another member state that will allow it in. It really goes against the grain that somebody would declare this to be such a problem of a scale that requires transnational powers, and then avoid the oversight of the transnational court.
There is all this dangerous language in the measure about procedural safeguards being dealt with in accordance with national law. These are pan-European safeguards. They should be interpreted as a matter of European Union law. That is what the standardisation of safeguards is meant to mean. We obviously will not be in it, but if the court in Dublin decided to dilute the safeguards, that is not acceptable. Whether or not the UK opt in, UK citizens will be subject to this, if they happen to be in the wrong country at the wrong time. It is important that we are all vigilant, to ensure that the safeguards are not diluted or made amenable to purely local interpretation.
Lord Dykes: As the trial proceeds, would not the EPPO certificate the jurisdictional accountability in each case, so that the prosecutor for whatever country would know which countries he was covering?
James MacGuill: As I understand it, once the trial commences, if it is commenced in France, it will be governed by French law to the exclusion of other relevant laws, whether it is Germany or Lithuania or anywhere else. We think that that is simply wrong in principle. We think that people should be entitled to go to a standardising European court, and say, “This ruling on the form of trial has been made in Paris. We are unhappy for the following reasons.” We want independent adjudication on that. You cannot have the prosecutor selecting the most convenient court, and that court deciding whether it is or is not going to deal with the case. That is simply wrong in principle.
Lord Stoneham of Droxford: Did Mr Kennedy have something to say on my question? I thought you might have done.
Mike Kennedy: I was thinking about the question on evidence, and what my colleague, James, has said. There is an article, Article 30, which deals with admissibility of evidence and attempts to deal with the issues that he has talked about. We ought not to forget that. Perhaps it does not deal with it in the way that he would like, but it is there; it is in the draft.
Q26 Lord Stoneham of Droxford: Will our judicial system be affected by us opting out?
Mike Kennedy: Dr Bradshaw has covered this. We should be under no illusion that there will be requests from a European Public Prosecutor for evidence that will be located in the United Kingdom. It is almost certain that any fraudster, as money moves around, is likely to be moved into the British banking system or financial system, and that we will receive requests, and that there will be somebody appearing in a court, possibly, to argue that evidence should be released. The EPPO, probably through an agent, a member of the Bar, will make those pleadings, so the EPPO will appear in court.
So that we can respond to proper requests made for evidence to be obtained, we need to ensure that our legislation can cope with that, and that it is amended in terms of the MLA requirements, whether it be the investigation order or extradition requirements—our Extradition Act and the European arrest warrant. I suspect there will be requests. If we do not get ourselves and our legislation in order, we will be seen as a safe haven for funding that has been obtained criminally and moved to this country. Or indeed individuals will come here and we will be some sort of 21st century Costa del Sol of 20 years ago. We really want to look at that. I am sure it is being looked at at the moment.
Lord Rowlands: I am trying to get my head around what exactly the burden of evidence is telling me. Is it that in fact we should go back to the drawing board, scrap the present proposals, and start again, or can we recalibrate or just modify the proposal before us? The burden of evidence seems to suggest we have to go back to the drawing board.
James MacGuill: I would not like to be seen as presenting a situation that is basically that you throw everything out. Some minor changes in philosophy would show the way to bring a measure through that we could all live with. The first is that the jurisdiction of the public prosecutor should be selective, rather than automatic and all-embracing. So, pick the cases that are genuinely appropriate. Make sure that the procedural safeguards are put in place from the get-go. Make sure that there is a European Court superintendence of the conduct of the prosecutor, so that the temptation to excessively forum shop, or abuse powers in any other way, is removed.
On the point that Mr Kennedy makes about Article 30 and the admissibility of evidence, that really does need to be beefed up. People who are proposing this measure lamely say, “You you can always go to the European Court under Article 263 of the treaty and get protection there”. That is not good enough. Protection has to be a value. It has to be spelled out in the document itself. If that was done and if there was real independence between the European prosecutor and the domestic prosecutors, as well as proper resourcing, there is no reason this could not work. We would be naive to suggest that the current mutual legal assistance measures are fit for purpose. They are way too bureaucratic, time-consuming and slow. Organised criminals are well-ahead of the game. This is not the measure to fix it.
Lord Rowlands: Dr Bradshaw, do you share that view?
Dr Bradshaw: I do share that view. We accept the scale of the problem, particularly given how widely PIF offences are defined. We also agree that the solution needs to be quick, but we see this proposal as not being very well thought-through, in terms of how it is going to function in practice, and that worries us.
Lord Rowlands: Could we put more weight behind the existing institutions, Eurojust and OLAF? If we did that, could that address the problem?
James MacGuill: If you are addressing that to me, I really would defer to Mr Kennedy, who has got the practical experience of it. There is an element of a self-fulfilling prophecy. From the moment people say the existing model cannot do the job, it will never be perceived as doing the job. I think there is need for something further to be put in place. This is a starting point, certainly.
The Chairman: Lady Eccles.
Baroness Eccles of Moulton: Lord Chairman, I have just been looking back, and I think probably the question I was going to ask was thoroughly dealt with before I lamentably joined the meeting late.
Q27 Lord Anderson of Swansea: Dr Bradshaw comments that it is not beyond repair and that amendments of a certain nature might make the project acceptable. Does she find that the Commission is open to suggestions? Is there a juggernauted view that what has been decreed will come about?
Dr Bradshaw: My personal view is that it would be very difficult indeed for the Commission to row back on the proposal, to the extent that the Law Society would like to see it do. The Law Society would be particularly keen on the powers of prosecutors at the European level to direct investigations and prosecutions in national courts to be toned down, so that there would be more ability of national authorities to refuse requests in appropriate circumstances. I suspect that the Commission would not to go back to that extent.
Lord Anderson of Swansea: When we saw, within another inquiry, Commissioner Reding, she was asked how many practitioners or former practitioners she had in her entourage. The answer was really quite disappointing, in terms of those with practical experience. Do the Bars and Law Societies of other countries believe that there is such a lack?
James MacGuill: Again, our experience of the Commission has been very good in recent years. They have an exceptionally good team dealing with the procedural safeguards. As you will recall, there was an attempt, in dealing with the access-to-a-lawyer measure, by some member states to permit the violation of lawyer-client confidentiality. The Commission stood firmly against that. That was an important thing for us. The official dealing with this particular file is a Hungarian, Peter Csonka, who is an eminently talented and experienced person. We would still see it as worth engaging and making representations. Whatever the political side of the member states, I do not think that Commission’s ears are shut on this yet.
Lord Anderson of Swansea: So there is a flexibility.
James MacGuill: It is political. Their hands are tied by their political masters, but arguments that are well-constructed will be entertained. I am not sure what happens after that. We would certainly feel it is worthwhile engaging in a constructive way with the Commission.
Lord Anderson of Swansea: The political masters may change.
James MacGuill: Absolutely; they may change on 24 May.
Mike Kennedy: Could I just add a short addendum? As I mentioned at the beginning, I am a member of the expert group, which is a group of 20 people from not all the member states; there are three from the UK. The Commission does consult widely. We did have a special meeting, about a year ago, about the proposal for an EPPO. At that stage, they had a number of thoughts and ideas, including a separate jurisdiction for the European Public Prosecutor, but they decided to go with this draft. They have put into it the measures that I mentioned earlier, to increase the capacity of those criminal justice systems that do not have the investigative means, shall we say, that exist in other countries.
As we have said, there is undoubtedly a political drive for there to be a European Public Prosecutor, and a real commitment for that to happen. Quite how it happens is still up for negotiation, in terms of the detail. I know you have heard about the Greek President’s proposal through the French and Germans, to slightly modify the management or the structure of the organisation. That is evidence that those people who are going to be involved are still able to have a fair say in how it might operate.
Q28 Lord Hodgson of Astley Abbotts: We should examine a little further whether we could do better with our existing institutions, such as Eurojust and OLAF, rather than creating a third one. When you read the OLAF report, they are quite gentle. The punches are pulled. If you had an OLAF report that spelled out what was going on, their concerns and the way they believed states were not conforming to the proper requirements—shame is a powerful weapon, probably more powerful than this proposal which will run into the sand of local investigators. Lord Rowland’s point is: are there not things we can do—that actually spells out what is going on, perhaps in a rather uncomfortable way, maybe for this country as well as other countries?
Mike Kennedy: I agree; naming and shaming is a very powerful tool, particularly when it is in an annual report, and it says, “Country X has not done this”, or, “Country X has lost files”. The reports that I wrote when I was at Eurojust often said that, and it had a devastating and immediate effect. I had calls from Ministers in some countries, saying, “Why on earth have you said this?” But, we did not lose any more files from that particular country. It has a devastating effect; there is no doubt about that.
The difficulty is that there is a political commitment within the Commission, and a number of member states, for there to be a European Public Prosecutor. That commitment is being delivered now. The majority of the countries that support Eurojust support it on the basis that it does not have any direct power to order national investigating and prosecuting authorities, either to investigate or to prosecute. That would be a step too far; that would be an interference with sovereignty, which is just politically unacceptable. Eurojust has gone a long way and has been able to persuade countries to take action, sometimes by naming and shaming. It has been effective, but it is not a European Public Prosecutor.
One other point that I would make, which is allied to this, is that I was reading a Eurojust report which came out last week; you may have seen a copy. I was very interested to see that Eurojust reported that there were only four PIF cases linked to OLAF that they had been dealing with last year.
Q29 Baroness Eccles of Moulton: There is a question that I really am moved to ask. You say that there is a lot of political dynamic in the Commission towards having an EPPO. That does not fall very comfortably on my ears. I thought that the people who had the political imperatives were more the Council of Ministers and the parliamentarians. The reason why I am saying this is because the “yellow card” was legitimately thought to be as strong as it should be, but there was a certain degree of slipping on the timing of the feedback from the Commission to the application of the yellow card. It does not read at all comfortably or convincingly. Therefore, it would seem that the persistence with the application of the EPPO, in light of the number of member states who are not comfortable with it, is perhaps taking for granted that the EPPO is going to come into being.
Mike Kennedy: Perhaps I used “political” in the wrong sense. There is a drive within the Commission, undoubtedly.
Baroness Eccles of Moulton: Okay. It just jarred.
James MacGuill: What will happen is, if there are nine-plus countries with the EPPO, the pressure will be on all the other countries to show that their domestic systems are not falling behind. You would perhaps find more enthusiasm to prosecute at a domestic level, and to find ways of using existing powers, for people to justify their decision not to enter into EPPO. We should always be reluctant to assume the solution to any problem is to seek greater powers, when perhaps the judicious use of the powers that are already there is actually the solution.
Q30 Lord Rowlands: There is, alongside all this, a draft directive of Eurojust itself, which the Government has decided not to opt in to, because of its connection with the EPPO. Looking at that draft on its own merit, should we have opted in?
James MacGuill: Being a UK thing, I would refer to Dr Bradshaw and Mr Kennedy.
Dr Bradshaw: The Law Society has not taken a view on the Eurojust regulation. We are still considering it and we will let the Committee have our comments once we have given it more time. To clarify my previous answer, the reason why I do not think that the Commission would row back to the model we want is because the model we would like to see is essentially Eurojust, but with as enhanced powers as is it possible to have, under the current treaty.
Mike Kennedy: The drafts were produced at the same time. There were proposals in it to improve the quality of what Eurojust does, how it does it and its capacity to link in or to work closely with the European Public Prosecutor. To some extent, there are things that can be taken forward in the Eurojust draft to improve its operational management that I think are very positive and good ideas. Other parts will depend, really, on what the final state of the EPPO regulation is. It is rather difficult to say without knowing more detail.
Baroness O'Loan: I just want to pick up very briefly on a point Mr MacGuill made at the end of his intervention there; he said that countries that were not engaged with the EPPO would up their game, as it were, and would have more effective legal systems. Surely, the evidence would show us that they probably would not recognise the existence of the fraud in the first place. There may well be less of an imperative to act in those areas than in other areas where they may have pressure on the judicial systems anyway. I do not think we can assume that not belonging will make countries better.
James MacGuill: I think bitter experience is to that effect. It would be unreal to assume, for instance, that there are no fraudsters in Ireland. Therefore, if there are fraudsters being prosecuted routinely in France and Germany for offences that are being committed in an identical style in Ireland, it will be an embarrassment to each of the non-EPPO countries. It makes the argument for EPPO. I do think that there will be a change in emphasis.
Q31 Lord Elystan-Morgan: Going back to Eurojust, it is clear that for the EPPO to succeed, Eurojust will have a much more advanced role than it has at the moment. Yet it seems to me from the documentation we have seen—I have raised this question at the Committee before—that it is estimated that the financial effect will be zero. How can there be enhanced responsibility and a more dominant and a dynamic role, and it not cost a penny more?
Mike Kennedy: That is a very good question. I do not know. The thrust of the idea is that resource will be moved from OLAF to Eurojust, whether it is personnel or whatever. There will be resource moved. The idea is that the quite substantial administrative structure within Eurojust could support the EPPO. I do not know how they would do it on a zero-basis.
Lord Elystan-Morgan: Do correct me if I am wrong, Lord Chairman. In the last 12 months, financially, Eurojust have been run down.
Mike Kennedy: Yes, I think my own agency, the Crown Prosecution Service—many agencies have had to be run down, have had to redesign their structures or have had to do work in different ways. You are right; it has been run down. In fact, if you look over the period of time, the budget for Eurojust has grown quite significantly in the last, say, five or six years.
Q32 The Chairman: For the record, it might be a good idea to ask you, assuming the EPPO comes into existence, how it would be possible to protect the position of countries like the United Kingdom, which will not participate.
Dr Bradshaw: The Law Society would like to see something in the regulation itself that would give the United Kingdom comfort that the quality of the assistance that they receive from OLAF and Eurojust will not be undermined. It is hard to see how the creation of the EPPO would not direct resources from non-participating states as well.
Mike Kennedy: I think that is a perfectly correct position to take. Undoubtedly, after time, the European Public Prosecutor’s Office and its staff will develop a range of expertise in investigating these sorts of cases, which really ought to be shared with non-participating member states. While the United Kingdom might not, as a member state, be involved in the EPPO, we should be engaging with it in discussion and negotiation, while we might not be part of the investigation and prosecution process. Although, as I mentioned earlier, we may actually be helping them to obtain evidence from this country or to surrender fugitives from this country who are wanted.
There are other questions too, such as joint investigation teams, which I suspect the EPPO might establish. If there is a case that involves evidence or individuals who are based in the United Kingdom and, let us say, Germany, France and the Netherlands, then it might be that the EPPO might want to work with those member states and might ask the United Kingdom to join. Whether the UK could actually join would depend on the relevant legislation. We work in a lot of joint investigation teams at the moment, outside this area. I do now know whether we would want to work with one inside it. It could be of mutual benefit, if the case was being prosecuted in part in the UK.
Q33 Baroness Liddell of Coatdyke: This might be an unnecessary question and I think I can guess what your answer would be. We have a very specific statement from the Commission about the creation of the EPPO. It is, and I quote, “It would have no adverse impact on either Eurojust or OLAF, and would not create disadvantages for the member states that are not participating”. Is that not trying to square the circle? Do you agree with it?
Mike Kennedy: I am sure that would be the desire. In practice, I am not sure. There is reluctance from some member states who are not going to be participating in the European Public Prosecutor as to what the relationship is going to be between their national representative at Eurojust and the EPPO, and the potential influence that the EPPO might have on them and how it might work in practice. Although that clearly is the desire, there may be some practical issues.
Baroness Liddell of Coatdyke: I sense that you are sceptical.
Mike Kennedy: Slightly. Again, until we know the detail, it is very difficult to make a prediction.
The Chairman: Thank you very much for appearing before us today. You will appreciate that these are very knotty problems. You are helping us very much to come to terms with some of the complexities. We are very grateful to you for your time today and your very competent elucidation. Thank you.