Just before Christmas, with the objective of further enabling Member States to deprive criminals of their illicit gain, the EU Commission proposed the adoption of an(other) instrument in the field of freezing and confiscation of assets deriving from criminal offences.
Due also to obligations under international and EU law, asset recovery laws and strategies – in particular against organised crime – have been increasingly adopted by contemporary criminal justice systems. Attacking criminal wealth has, indeed, a strong preventive and strategic dimension: focusing on the property of criminal organisations, for example, helps law enforcement authorities reach through their top, and it gives more tools to neutralise and dismantle them. The idea that asset recovery is essential to tackle these organisations has been lately coupled with the conviction that it is helpful against terrorism, too. The Commission proposal was indeed announced at the beginning of 2016 with the ‘Action Plan for strengthening the fight against terrorist financing’.
The EU policy on asset recovery
Asset recovery is a multi-phase process that is, or at least should be, launched every time a criminal offence has generated a financial gain, wherever the money is located. Such a process relies on confiscation laws, but starts with the financial investigations aiming at tracing the proceeds of crime, and includes the freezing of assets (i.e. provisional decisions in the course of the process); their management; the confiscation of crime proceeds and instrumentalities; and finally their disposal (i.e. to whom recovered assets are allocated, and how they are used by public authorities).
Being inherent to the exercise of jurisdictions in criminal law, such a process is in the hands of national authorities and legislators. However, since the end of the last century the EU legislator has been trying to boost such a process and has worked in a twofold direction: on the one hand, it aims to facilitate the cooperation between national authorities and, on the other hand, it tries to harmonise national laws.
Much more than in other areas of criminal law, indeed, the different traditions of EU legal systems give rise to an extremely fragmented setting, where one can easily observe a great variety of legal concepts and approaches. For example, there are many types of confiscation orders (such as ‘value confiscation’, ‘extended confiscation’, ‘third party confiscation’, ‘non-conviction-based confiscation’). In some countries, confiscation orders might also be issued outside criminal proceedings, in a distinct and autonomous set of proceedings (e.g., the civil forfeiture in UK and Ireland, or the preventive confiscation in Italy). These forms of confiscation are often considered to be the most effective.
When the Lisbon Treaty entered into force in 2009, Framework Decisions aiming to harmonise some of these concepts were already in force, and so were Framework Decisions applying the mutual recognition principles to the judicial cooperation in this field. The success of such a cooperation mechanism in the asset recovery domain, however, has been much lower than that within the domain of the European Arrest Warrant: the existing instruments are not used a lot in practice and the level of confiscated assets was (and still is) very low, at least according to available statistics and estimations. The Commission itself identified the weak and incorrect transposition of those instruments into national law as the main culprit of such a failure.
At the same time, it recognised that the existing legal framework is incomplete and sometimes inconsistent. National resistance during the negotiations of the pre-Lisbon instruments led, indeed, to strange results. The most notorious example consists of the interplay between one harmonisation instrument (Framework Decision 2005/212/JHA) and one mutual recognition instrument (Framework Decision 2006/783/JHA), where a difference between national systems may become a legitimate ground to refuse cooperation, running counter to the very logic of mutual recognition.
The first step of the post-Lisbon strategy consisted of trying to further reduce national differences. Directive 2014/42/EU of 3 April 2014 on the freezing and confiscation of instrumentalities and proceeds of crime in the European Union aims to lay down minimum common rules concerning confiscation measures. Without entering into the details of those provisions, it is worth pointing out that their content is not as far reaching as envisaged by the Commission when proposing the new instrument. Again, national resistances within the Council played havoc with the harmonising ambitions. These resistances were based – among other concerns – on legitimate worries about overly burdensome provisions that would risk undermining fundamental rights, like the presumption of innocence, the right to a fair trial, and the right to property. They resulted in provisions that leave a broad room for manoeuvre to national legislators. Furthermore, due to Treaty limitations, the Directive had to exclude from its scope all the (effective) forms of confiscation falling outside the realm of criminal law.
The fact that the new instrument does not cover the whole array of confiscation measures left the impression that the work was unfinished. The deadline for the transposition of the Directive 2014/42/EU was in October 2016; however, even before reading the Commission’s assessment of its implementation (expected by the end of 2018) one cannot but conclude that even in the best scenario the new Directive is just a small step in the direction of developing more ‘harmonised’ rules on confiscation throughout the EU. That explains why immediately after its adoption, the Parliament invited the Commission to study the possibilities for elaborating new common rules on non-conviction-based confiscation, as well as new rules on mutual recognition of freezing and confiscation decisions (in order to repair the shortcomings of the existing framework). The Proposal presented on 21 December 2016 has exactly this objective.
The proposed Regulation: old wine in a new bottle?
Aiming to replace the existing mutual recognition instruments the new proposal may seem to put forward a mere recast of the existing legal framework. Certainly it does not introduce new concepts nor a revolutionary approach to asset recovery; nonetheless, if it will be adopted as it is, some meaningful improvements can be expected. It contains, for example, provisions laying down clear time limits, procedural safeguards, asset sharing (i.e., to what extent the executing authority has to return the assets to the requesting jurisdiction), and – for the first time in an international instrument on asset recovery – victim compensation. In general, the added value of the instrument can be summarized in three points.
First, the choice of the instrument: for the first time in the criminal law field, a Regulation has been proposed instead of Framework Decisions (before Lisbon) and Directives (after Lisbon). The functioning of the instrument, therefore, will not depend on how national legislators transpose the EU text into national law, avoiding the risk of ‘patchy’ interpretations that undermine its effectiveness.
Second, the grounds for refusal: the list of legitimate reasons to refuse the execution of a freezing and confiscation order is significantly shorter than the one contained in previous instruments. Most importantly, any possibility to refuse the execution because of the differences between legal systems disappeared. This is more consistent with the rationale of mutual recognition and an important step forward compared to the existing framework.
Third, the scope of the proposed instrument: the new Regulation would cover every type of freezing and confiscation order issued within the criminal proceedings (i.e., not only those harmonised by Directive 2014/42/EU). However, the Proposal does not cover confiscation orders issued outside criminal procedures (e.g., administrative and civil asset forfeiture). The existing legal bases would probably allow such a scope extension; nevertheless, the Commission has discarded this option following the opinions of several ‘stakeholders’: the adoption of an instrument imposing the recognition of non-criminal orders would be, in other words, politically unrealistic (see the Impact Assessment accompanying the proposal, p. 38-39 and p. 55). This will likely remain, therefore, a loophole also in the future EU legal framework, and a Member State issuing a non-criminal confiscation order will still have to seek cooperation abroad relying on more traditional instruments adopted within the Council of Europe, which leaves much more discretion to the executing authority.
In conclusion, it will be interesting to see how the Parliament and the Council (i.e., the Member States) will amend the proposed instrument. The Commission’s Proposal may certainly appear like a mere update, or a cosmetic upgrade, of the existing instruments on judicial cooperation on asset recovery, and one could argue that more advanced provisions should have been elaborated in order to increase its effectiveness. From another perspective, however, taking into consideration the political feasibility, this is an approach that may allow the EU, if not to make a giant leap, at least to move forward and to fix some problems experienced in practice. After all, the history of EU criminal law – and in particular of the EU action on asset recovery – is characterised by little steps rather than sudden revolutions.
For further reading on the various aspects of asset recovery in the EU, see the recently published: K. Ligeti and M. Simonato (eds.), Chasing Criminal Money: Challenges and Perspectives on Asset Recovery in the EU (Oxford, Hart, 2017).