Nowak Celina (red.), Evidence in Eu Fraud Cases

This publication is the most recent volume devoted to the protection of the financial interests of the European Union, issued by the European Law Research Association. This time the Association has decided to address a very practical issue of collection and admissibility of evidence in cases of PIF offences from the perspective of administrative as well as criminal law. We had an opportunity to reflect on this important question during a conference entitled "Evidence in EU fraud cases" which took place on 18-19 October 2012 in Warsaw and was the seventh international 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 on the front line in the fight against fraudulent acts affecting the budget of the European Union. We were particularly honored by the presence of Dr Giovanni Kessler, Director General of OLAF.

The choice of the theme of this book, and earlier - of the conference, was a consequence of our previous experiences. The collection of evidence and especially its admissibility is a major practical challenge, particularly when it comes to the interaction between administrative and criminal proceedings. We therefore hope that this book will help clarify at least some of the problems related thereto.

***

This publication would not have been possible without the support of the European Commission through OLAF and the Kozminski University in Warsaw, and we express our deepest gratitude to both.

Warsaw, March 2013

Prof. Lech K. Paprzycki

President of the European Law Research Association in Poland

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 Public Prosecutors' Office - as well as a wider issue of development of the European Union criminal law and interactions between administrative and criminal proceedings.

In this volume we have examined issues related to evidence in cases of offences affecting the financial interests of the European Union (hereinafter referred to as "PIF offences"). Our focus was on both administrative and criminal proceedings; we wanted to address the issue of collection and admissibility of evidence in national and transnational proceedings. The results of the analysis clearly indicate that there are differences of standards related to evidence in administrative proceedings conducted by OLAF on the one hand and by national authorities in criminal proceedings on the other. In my view these differences are due to the intrinsically administrative nature of OLAF's investigations, which may not easily be reconciled with criminal procedure. Both the EU and the Member States should therefore pursue solutions to this problem. To some extent it seems that the answer can be found in criminal law and institutions dealing with criminal law, such as the European Public Prosecutor's Office.

Chapters in this volume can be divided into three groups. The first group analyzes general problems.

In his introductory chapter Giovanni Kessler gives a brief account of the state of affairs in the field of protection of the financial interests of the European Union as of the end of 2012. He points out the main deficiencies of the current system of protection, and analyzes new initiatives aimed at addressing these problems. The new ideas and mechanisms of improvement he refers to include two new legislative proposals: for a directive on the protection of the financial interests of the EU by criminal law and for a directive on the harmonization of procedural criminal law in the Member States. Legislative changes will also be required in order to establish the European Public Prosecutor's Office. In addition, there is a need to revise Regulation 1073/1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF), in order to better align these investigations with human rights standards.

John Vervaele's chapter gives a thorough and insightful perspective on gathering evidence in EU fraud cases, with a special focus on one of the links in the enforcement chain, that is on the control phase. The author analyzes EU competences to control the Member States with a view to protecting the European Union's budget. He very rightly points out some deficiencies of the controlling system related to the interactions between the EU and Member States competences and emphasizes that creation of new institutions such as EPPO will not solve the problems of the investigative powers of EU institutions or the evidentiary status of their findings in national criminal proceedings. These issues certainly require further attention and regulation.

The two chapters that follow are devoted to administrative law. The first chapter, by Jacek Skonieczny, offers a practitioner's perspective on collecting information and evidence on EU fraud in national administrative proceedings. Due to his own professional experience, the author focuses on proceedings relating to VAT in intra-Community transactions, but his considerations are applicable universally, to other inspection procedures relating to the inspection or audit of the management of funds originating from the EU.

The chapter by Mateusz Błachucki offers a very interesting analysis of procedural safeguards at the evidence stage of administrative proceedings in the light of the legal standards of the European Convention on Human Rights. This issue is of great practical importance, for if one wants to think about the exchange of evidence between administrative and criminal proceedings, it seems clear that the ECHR standards must be taken into account. The conclusions of this chapter are optimistic to the extent that Polish law seems to be generally in line with the conventional requirements.

Several subsequent chapters deal with criminal law and add a comparative perspective to the analyzed issues. The first chapter in this section of the book presents the Polish perspective on the role of Police in combating EU fraud. The chapter deals with several issues, such as the types of offences criminalizing fraud detrimental to the EU financial interests, Police tasks in collecting evidence, cooperation with other entities involved in combating crime against EU financial interests and general rules on admission of evidence.

The following two chapters are devoted to the Italian experience in respect to fighting EU fraud. In his chapter Bernardo Cartoni first gives a brief outline of the rules of the Italian criminal procedure and then addresses the issue of evidence collected by OLAF in Italian criminal proceedings. His analysis is extremely interesting as it is based on examples of cases dealt with by Italian courts in recent years. He notes "a great dichotomy" in the status of OLAF produced evidence between administrative (tax) proceedings and criminal proceedings. In tax proceedings judges recognized the full value of the OLAF final report, whereas in criminal proceedings no conviction has been based on OLAF produced evidence. This finding encourages Cartoni to put forward a proposition to regulate the value of OLAF produced evidence in criminal proceedings at EU level.

The value of OLAF produced evidence in Italian criminal procedure is also considered by Riccardo Nodari and Vania Cirese in their interesting chapter. Their contribution contains more details on the rules of admissibility of evidence in Italy and the Italian system of prosecuting tax fraud. They point out that evidence collected by OLAF is of limited value in criminal proceedings.

The chapter by Laszlo Kis discusses the status of OLAF produced evidence in Hungarian criminal procedure. The author starts by giving a brief outline of criminal procedure in Hungary. He then analyzes the rules on the admissibility of evidence obtained outside the criminal procedure, including the principles relevant to the possible use of OLAF produced evidence in both the investigation and trial phase of criminal proceedings in Hungary. Kis concludes by saying that in fact OLAF's reports "usually serve as a starting point" for criminal proceedings, of informative value.

In their chapter Stefano Filletti and Stephanie Shaw give record of the Maltese experience with OLAF produced evidence. They start with an overview of Maltese criminal proceedings and then focus on rules relating to evidence. When considering the role of OLAF evidence in criminal proceedings the authors establish that it may be quite limited due to the specificity of the Maltese system. Yet it may be too soon to tell as the only Maltese case of EU fraud is still pending.

Grażyna Stronikowska in her chapter offers a Polish take on OLAF produced evidence. Her chapter is based on the analysis of four criminal cases in which in recent years OLAF supplied the Polish Public Prosecutor's Office with final case reports of administrative proceedings which indicated that according to OLAF an offence might have been committed. The examination indicates discrepancies between standards related to evidence in proceedings conducted by OLAF on the one hand and by Polish prosecutors and courts on the other.

The chapter by Celina Nowak is intended to present the legislative and statistical perspective on PIF offences in Poland. The author analyzes the level of implementation of three main PIF offences in Polish law: fraud, corruption and money laundering. She also proposes that the fight against PIF offences should be carried out with the use of targeted measures and the analysis of accessible statistical data will be helpful in preparing such measures. The results of the analysis indicate that the number of PIF offences in Poland is low, and the conviction rates even lower.

The last article in the volume, by Barbara Nita, addresses the possible future developments in the field of mutual legal assistance in criminal matters, particularly mutual admissibility of evidence. The author presents the evolution of mechanisms of cooperation in criminal matters between the EU Member States in this area, and pays special attention to the European Evidence Warrant. Finally, the author analyzes the premises of the European Investigation Order which is to replace or rather supplement the European Evidence Warrant.

***

This is the second 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.

Dr Celina Nowak

Secretary General of the European Law Research Association

This chapter is based on the examination of files in four criminal cases in which in the years 2008-2011 OLAF transmitted to the Polish Public Prosecutor's Office final case reports of administrative proceedings it had carried out and which indicated that according to OLAF an offence might have been committed. The purpose of the analysis of these cases was to establish what kinds of documents OLAF transfers to the Polish Public Prosecutor's Office and what types of decisions and actions with regard to these documents prosecutors undertake in the framework of preparatory proceedings and the courts during trial.

The subject final case reports were as follows:

Two of these cases were already concluded in a final and valid manner (one with a sentencing judgment, and one with a decision on discontinuance of proceedings), whereas in two other cases preparatory proceedings are still pending.

As any other EU Member State, Poland is obliged - pursuant to Art. 325(2) TFEU - to take the same measures to counter fraud affecting the financial interests of the European Union as it takes to counter fraud affecting its own financial interests. This task has multiple dimensions. Firstly, there is a legislative dimension - the Member States are obliged to adapt their national legislations to the binding EU instruments in this field. This obligation affects many areas of law, but criminal law in particular. There is also an institutional dimension - there must be domestic institutions called to protect EU financial interests and to cooperate with European institutions and respective institutions in other Member States. Finally, there is a practical dimension, which is required to put the whole mechanism of protection into motion.

All three aspects of the problem in question are equally important. However, in this chapter I would like to focus on legislative and practical aspects, seen from the criminal law perspective. This chapter is therefore aimed at investigating two issues: the compliance of Polish criminal law with EU law as regards the criminalization of acts detrimental to the EU financial interests and the magnitude of PIF offences in Poland in the last decade. This task requires, first, the identification of offences which may qualify as PIF offences under Polish law. Therefore, I shall analyze the provisions of Polish criminal and fiscal criminal law which may be considered as PIF offences and verify if the scope of criminalization and sanctions meet the requirements set forth in EU legal instruments. Then, I will analyze the available statistical data with regard to each of the offences respectively.

The harmonization of Polish law with EU law is necessary from the practical point of view - it may contribute to an easier cooperation with other EU Member States. For this reason the analysis of the level of implementation seems very useful. Also, knowing the scale of acts affecting the financial interests of the European Union is advisable as well - it may help the EU and the Member States to better understand the phenomenon and to adjust the mechanism of protection accordingly.

The focus of this chapter is criminal law, so I shall refer to such acts which qualify as offences only (hereinafter referred to as "PIF offences"). The assessment of the scale of PIF crime is an important and at the same time challenging task. It is important as it allows the Union and the Member States to establish the dimension of criminality detrimental to the EU financial interests and to consider what steps are appropriate to fight against it. It is also difficult because, like with any other type of criminality, it is difficult to estimate the dark figure of crime. In fact, one has to rely on crime statistics, coming from official sources only. There are some estimates published in the media referring to the magnitude of funds that may be subject to fraud, but it is not clear to what extent these estimates are reliable.

At the outset of the analysis I should point out that when it comes to Poland, data on offences affecting the EU financial interests are not collected systematically by public administration. In particular, this issue does not appear at all in the statistical tables provided by courts to the Ministry of Justice, which has the most comprehensive statistical database on courts' activities, dimension of criminality, penalties, etc. nationwide.

At present, the most comprehensive source of data on final and valid convictions seems to be the National Crime Register. The Register collects data on offenders and their criminal records. In 2009, on the basis of an amendment to the Act on the National Crime Register, aimed at implementing the Commission Regulation (EC, Euratom) No 478/2007 of 23 April 2007 amending Regulation (EC, Euratom) No 2342/2002 laying down detailed rules for the implementation of Council Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities, the Register was obliged to transmit information identifying the economic operators, as well as concerning persons with powers of representation, decision making or control over economic operators which are legal entities, and legal persons themselves, to the ministry responsible for finance, regional development and agriculture (new Art. 4(1) p. 6). As of 16 April 2009 the Register collects data on final and valid convictions with regard to persons who committed an offence against the financial interests of the EU.

Data on proceedings carried out in cases of offences affecting the EU financial interests are collected by the General Public Prosecutor's Office and the Police Headquarters, albeit not in a systematical and comprehensive manner.

The analysis will be limited to PIF offences defined in the PIF Convention of 1995 and its two additional protocols, i.e. fraud, corruption and money laundering.