FIGHT AGAINST EU FRAUD ADMINISTRATIVE AND CRIMINAL LAW ISSUES

FIGHT AGAINST EU FRAUD ADMINISTRATIVE AND CRIMINAL LAW ISSUES Edited by Celina Nowak Translated by Marek Albigowski Agata Małecka Celina Nowak Warszawa 2011

Contents Contents Abbreviations / 7 Preface and acknowledgements / 9 Introduction / 11 Dr Simone White EU anti-fraud: strategy and legislation in a period of consolidation / 15 Dr Justyna Łacny Protection of the EU budget expenditure recent tendencies / 41 Prof. Eleonora Zielińska Administrative responsibility for irregularities affecting the financial interests of the European Union with regard to expenditure general rules of liability / 73 Prof. Barbara Nita Efficient protection of the financial interests of the European Union penal or administrative sanctions / 83 Michał Pesta Investigations conducted by OLAF the European Anti-Fraud Office / 96 Grażyna Stronikowska Administrative and criminal proceedings with regard to financial irregularities cooperation experiences / 102 5

Contents Prof. Lech K. Paprzycki Cooperation of national prosecutors, investigation agencies and judicial authorities with the EU institutions in subsidy cases / 111 Rafał Kierzynka The protection of the financial interests of the European Union in the context of developing an area of freedom, security and justice / 123 Andrzej Sawicki The role of Europol in combating fraud affecting the EU s financial interests / 129 Dr Andrzej Sakowicz The principle ne bis in idem in framework decisions of the Council of the European Union in the light of the provisions of the Polish Criminal Procedure Code / 134 John Sweeney Added value of audit in the protection of the EU financial interests / 154 Dariusz Jurczuk, Dr Jacek Mazur The role, tasks and results of the activities of the Polish Supreme Audit Office (NIK) in counteracting irregularities with regard to EU funds / 163 Dr Celina Nowak European Union criminal law a laboratory of internationalization of law / 181 6

Abbreviations Abbreviations CPC CzPKiNP EAW EJN EPP EU JIT NIK OJ OLAF PIF Convention PiP Prok. i Pr. TFUE TEU Criminal Procedure Code Czasopismo Prawa Karnego i Nauk Penalnych European Arrest Warrant European Judicial Network European Public Prosecutor s Office European Union joint investigation team Supreme Audit Office Official Journal European Anti-Fraud Office 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 Państwo i Prawo Prokuratura i Prawo Treaty on the functioning of the European Union Treaty on European Union 7

Preface and acknowledgements Preface and acknowledgements This publication is the most recent volume devoted to the protection of the financial interests of the European Union, prepared by the European Law Research Association. This time the Association has decided to address the issue of the fight against irregularities by means of both administrative and criminal law. We had an opportunity to reflect on this important question during a conference entitled Fight against irregularities administrative and criminal law aspects which took place on 14 15 April 2011 in Warsaw and was the sixth international scientific conference organized by the Association. It gathered many internationally and domestically recognized experts in the field of protection of the EU financial interests, as well as many legal practitioners especially public officials who are in the front line of combat against acts affecting the budget of the European Union. Since the beginning, the Association s main interest had been criminal law. However, an effective protection of the financial interests of the European Union requires implementation of other instruments besides the penal. Administrative law may also become a very useful tool, a good reason for spending more time on research in this field. *** This publication would not have been possible without the support of the European Commission through OLAF and Kozminski University in Warsaw, and we express our deepest gratitude to both. Warsaw, October 2011 Prof. Lech K. Paprzycki President of the European Law Research Association in Poland 9

Introduction Introduction The European Law Research Association in Poland has focused on the protection of the financial interests of the European Union since it was established. We have analyzed the provisions of Corpus Juris, the process of harmonization of Polish law with acquis communautaire with regard to the protection of the financial interests of the EU, cooperation between national and European institutions in this respect especially after the establishment of the European Prosecutors Office as well as a wider issue of development of the Union criminal law 1. In this volume we have examined issues related to the fight against irregularities affecting the financial interests of the European Union, carried out with the use of both administrative and criminal law instruments. It is worth noting that the articles presented in this volume have been prepared by representatives of both the academic and practice worlds. This may give readers a perspective beyond the usual theoretical one. The articles in this volume can be divided into three groups. The first group analyzes general problems, mainly connected with administration liability. Simone White has focused on three general and current issues as regards OLAF s future in the view of as she calls it more integrated policy-making: the interface between administrative and judicial spheres, aspects of criminal law-based protection of the financial 1 Other books published by the Association are as follows: Instytucje i instrumenty prawne w walce z przestępczością przeciwko interesom finansowym Unii Europejskiej prawo krajowe i perspektywa europejska. Materiały z konferencji, Warszawa, 4 7 grudnia 2003, eds. M. Hudzik, C. Nowak, Warszawa 2005; Ochrona interesów finansowych rozszerzonej Unii Europejskiej: nowe wyzwania, stare problemy. Materiały z konferencji, Sopot, 16 19 marca 2006, ed. C. Nowak, Warszawa 2007; Organy ścigania i wymiaru sprawiedliwości a ochrona interesów finansowych Wspólnoty Europejskiej. Materiały z konferencji, Warszawa, 15 17 listopada 2007, ed. C. Nowak, Warszawa 2008; Ochrona interesów finansowych Wspólnoty Europejskiej a przemiany instytucjonalne Unii Europejskiej, ed. C. Nowak, Warszawa 2009. 11

Introduction interests of the EU (including the prospects for a European Public Prosecutor s Office) and prevention, another axis for OLAF intervention, which supplements its primary investigative function. Next, Justyna Łacny refers to the most recent developments concerning the protection of the budget of the European Union with regard to both administrative and criminal law, especially in light of the changes to the criminal law framework for the protection of the Union s financial interests resulting from the Treaty of Lisbon and the proposed modifications to the legal framework of OLAF s activities. The author describes some of the practical problems related to the protection of EU financial interests, and states that they fall outside normative provisions and are questions of the application of law. Therefore only time will tell how, and to what extent, the Member States and the Union s institutions will be willing to implement their plans to make the cooperation in combating irregularities more effective. Next, Eleonora Zielińska examines the general framework of administrative responsibility for irregularities affecting the financial interests of the European Union, focusing on expenditure. The author analyzes the definition of irregularity, discusses general rules of liability, such as the nulla poena sine lege principle, and analyzes the issue of limitation periods for cases referring to irregularities in detail. She also deals with the subject administrative sanctions for irregularities. The author refers to the difficulties in interpreting European legal regulations referring to the protection of the EU financial interests, some of which, fortunately, may be clarified by the European Court of Justice. Subsequently, Barbara Nita analyzes the issue of administrative and criminal sanctions, focusing on group entities (legal persons and organizational units without legal personality). She points out constitutional limitations in some EU Member States that are an obstacle to applying criminal responsibility to group entities, and examines the implication that administrative sanctions may offer a suitable level of protection of the EU financial interests in lieu of criminal liability. Her article also covers doubts concerning the actual nature of sanctions known as administrative, and notes that safeguards provided for criminal responsibility should in fact apply to those types of sanctions which are criminal by nature, even though not criminal by name. A representative of OLAF, Michał Pesta gives an outline of the investigations conducted by this agency, while Grażyna Stronikowska, who was seconded in the capacity of a national expert to OLAF, gives 12

Introduction a detailed presentation of problems related to the cooperation between OLAF and Polish prosecuting authorities. The second part of the book refers to the selected issues of criminal cooperation in protection of the financial interests of the EU. First, Lech K. Paprzycki analyzes the general framework of cooperation between national prosecutors, investigation agencies and judicial authorities and the EU institutions, in particular Europol, Eurojust and European Judicial Network. The author looks at the cooperation of these European institutions amongst themselves with regard to the offences affecting the financial interests of the European Union, as well as their cooperation with national authorities conducting administrative proceedings. Having established the complexity of the framework of cooperation between agencies involved in protecting the EU financial interests, the author points out the need for a wider study to determine the extent of cooperation between the administrative authorities and law enforcement and judiciary within particular Member States. In the next article, Rafał Kierzynka examines the issue of protection of the Union s financial interests through criminal law with a view to establishing an area of freedom, security and justice. He discusses several factors contributing significantly to the quality of national proceedings with an international element and analyzes each of them from the point of view of both European and Polish law. Additionally, Andrzej Sawicki presents Europol s role in protecting the financial interests of the European Union, describing some experiences of Europol s activities in this respect from a practical point of view. In the last article devoted strictly to criminal law issues, Andrzej Sakowicz examines provisions referring to the ne bis in idem principle set forth in numerous framework decisions. This principle is the manifestation of mutual recognition of judicial decisions in criminal matters, and therefore a fundamental part of the European co-operation in this area. The main instrument which has been analyzed in the article is the framework decision on European arrest warrant, but other instruments are also examined. The third part of the book is devoted to problems related to auditing, which plays a crucial role in the prevention and detection of irregularities. In his paper, John Sweeney, representing the European Court of Auditors, starts by describing the European Court of Auditors public sector audit role. Then he moves on to the general characteristics of irregularity and fraud, in order to examine the role of auditors carrying out audits 13

Introduction and their responsibilities. This brings him to the analysis of the Court s role and strategy for dealing with the threat of irregularity and fraud concerning the EU budget. The author also presents some examples of the ways in which the Court actively contributes to improving the financial management of the EU budget. The Polish perspective with regard to auditing is presented in the paper prepared by Jacek Mazur and Dariusz Jurczuk, both working in the Polish Supreme Audit Office. They analyze in detail the immense work done by the Office to prevent and detect irregularities affecting the financial interests of the European Union. Their reflections in this respect are based on the concrete examples of audits carried out by the Office within the past couple of years with regard to EU funds. The last article in the volume, by Celina Nowak, is intended to present a more general reflection. The author endeavors to prove that the European Union is a laboratory of internationalization of law. Using the example of criminal law in the European Union, and more specifically the legal regulations aimed at the protection of the EU s financial interests, the author describes the genesis, course and the outcome of the process of internationalization of law. The author intentionally avoids referring to the commonly used notion of Europeanization, and points out the fact that the Europeanization is only a part of a wider global phenomenon of complex interactions between the supranational and national legal systems. *** It should be noted that as of the entry into force of the Treaty of Lisbon, the European Communities do not exist any more. Therefore, the analysis contained in this book refer to the protection of the financial interests of the European Union, but we have left unchanged the texts of legal provisions adopted at the time when the Communities still existed. This is the first book prepared by the Association published entirely in English, at the suggestion of OLAF. We hope that the results of our work and research will therefore be accessible to a much wider range of readers. 14 Dr Celina Nowak Secretary General of the European Law Research Association

Simone White Dr Simone White* EU anti-fraud: strategy and legislation in a period of consolidation In 2010, the Stockholm Programme 1 called upon the Member States and, where appropriate, the Commission to enhance the capacity for financial investigations and combine all available instruments in fiscal, civil and criminal law 2. This set the tone for more integrated policy-making. In 2011, the Commission published a proposal for an amended Regulation 1073/99 3 dealing with some of the procedural and inter-institutional issues affecting the European Anti-Fraud Office (OLAF henceforth). A Communication on the protection of the financial Interests of the European Union by criminal law and by administrative investigations ( PIF Communication henceforth) 4 focuses on the criminal law aspects of protecting the financial interests of the EU, as its title suggests, although the approach to the European Public Prosecutor s Office remains timid. A Commu- * Dr Simone White works for OLAF (European Anti-Fraud Office, part of the European Commission) in Brussels and is an Honorary Research Fellow at the Institute of Advanced Legal Studies in London. This chapter is not intended to reflect the views of the European Commission. 1 European Council (2010) The Stockholm Programme an open and secure Europe serving and protecting citizens, OJ C 115, 04.05.2010, p. 1. 2 The emphasis added here is the author s. 3 COM(2011) 135 Amended proposal for a regulation of the European Parliament and of the Council amending Regulation (EC) 1073/99 concerning investigations conducted by the European Anti-Fraud Office (OLAF) and repealing Regulation (EURATOM) 1074/99, 17.03.2011. 4 COM(2011) 293 Communication from the Commission to the European Parliament, the Council of, the European Economic and Social Committee and the Committee of the Regions on the protection of the financial interests of the European Union by criminal law and by administrative investigations An integrated policy to safeguard taxpayers money, 26.05.2011. 15

EU anti-fraud: strategy and legislation in a period of consolidation nication on the Anti-Fraud Strategy 5 and a Communication on fighting corruption in the EU 6 offer a comprehensive policy framework, emphasising prevention, monitoring and better implementation of existing legislation. As the policy areas covered are vast, we have chosen here to concentrate on the interface between administrative and judicial spheres, on aspects of the criminal law-based protection of the financial interests of the EU (including the prospects for a European Public Prosecutor s Office) and on prevention, another axis for OLAF s intervention, which complements its primary investigative function. We start here with the interface between the administrative and judicial realms, where legal issues with a direct impact on the effectiveness of OLAF investigations need to resolved. We then move on to the wider criminal law context (including the rights of suspects) and to the possibilities offered by the preventive approach put forward by the Commission. 1. The interface between administrative and judicial spheres The PIF Communication 7 recognises that there is a systemic weakness affecting the administrative/judicial interface at Union level and recommends a cross-cutting approach: Whilst bases for exchange between police and judicial authorities across the Union exist, this is not yet the case for cross-cutting exchanges of information among police, customs, tax authorities, the judiciary and other competent authorities. The Commission intends to remedy this situation by replacing its 2004 proposal 8 on mutual administrative assistance for the protection of financial interests. 9 5 COM(2011) 376 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, and the Committee of the regions and the Court of Auditors on the Commission Anti-Fraud Strategy, 24.06.2011. 6 COM(2011) 308 Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee on Fighting corruption in the EU, 06.06.2011. 7 See n. 5. 8 COM(2004) 509 as amended by COM(2006) 473. 16 9 See n. 5, p. 10.

Simone White This interface is also an issue for OLAF, as it carries out administrative investigations and, when appropriate, forwards information to judicial authorities, usually in the shape of case reports. Regulation 1073/99 10 stipulates that in drawing up its case reports, OLAF must take into account the procedural requirements laid down in the national laws of the Member States concerned. Reports drawn up on that basis must constitute admissible evidence in the administrative or judicial proceedings of the Member State, in the same way and under the same conditions as administrative reports drawn up by national administrative inspectors 11. The OLAF Supervisory Committee receives a copy of all reports sent to judicial authorities, in accordance with Article 11(7), last sentence of Regulation 1073/99 12. There are no detailed implementing rules for this interface. In theory, if OLAF ensures that the information it sends to national authorities is both actionable and admissible, this should result in the national authority giving serious consideration to starting criminal proceedings and, when appropriate, a civil action for recovery of funds. However, in practice, there is nothing seamless, nor automatic about this process, as we shall see. In relation to the successful investigation and prosecution of EU fraud, issues have been identified both from the Member States and from OLAF s points of view. At a conference held in the Cour de Cassation in Paris in 2010, Lech Paprzycki outlined the handicaps that OLAF faces in this context. They include: at the domestic level, obstacles to using OLAF s reports as evidence in criminal cases, the lack of any procedural status for OLAF in domestic criminal proceedings, the lack of EU judicial authority competent to deal with OLAF cases and to control OLAF s investigative work 13. These are examined in turn below. 10 Regulation 1073/99 concerning investigations conducted by the European Anti- Fraud Office, OJ L 136, 31.05.1999, p. 1. 11 Article 9(2) of Regulation 1073/99. 12 See n. 15. 13 See Dalloz Thèmes Commentaires Actes (2010) Quelles Perspectives pour un ministère public européen? Protéger les intérêts financiers et fondamentaux de l Union, sous l égide de la Cour de Cassation, Dalloz, p. 93 97. 17