European Criminal Law: Fighting Fraud and Corruption in the EU

Crimes for the protection of the European Union's financial interests

The fight against fraud and corruption

Luiss Undergraduate School Corso di Laurea in Giurisprudenza European Criminal Law Week 8 A.A. 2024/2025 LUISSSpecial Part - 1 Crimes for the protection of the European Union's financial interests: the fight against fraud and corruption Prof. Maurizio Bellacosa

The birth of European Criminal Law

LUISS 2The birth of European Criminal Law . In the first years of the European Communities, all efforts were essentially aimed at the creation of a single market and at granting free movement of goods and persons: during this first phase, there was an increasing harmonization of Civil Law, while the Criminal Law was still perceived as a national matter. . Starting from the 70's, the possibility of a protection under Criminal Law of the financial interests of the European Community became a subject of discussion.

19 76 Draft for a Treaty on the protection under criminal law of the financial interests of the Communities and the prosecution of infringements of the provisions of those Treaties (OJ n. 222, 22.09.1976) Prof. Maurizio Bellacosa

The assimilation principle

LUISS 3The assimilation principle . According to this principle, the protection of the financial interests of the European Communities shall be entrusted to the Member States' legal systems, on the assumption of the substantial assimilation between national and European interests.

• ECJ, Case 68/88, Commission v. Greece (so called «Greek maize case>; ECR 2965): Member States "must ensure in particular that infringements of Community law are penalized under conditions, both procedural and substantive, which are analogous to those applicable to infringements of national law of a similar nature and importance and which, in any event, make the penalty effective, proportionate and dissuasive".

. In other words, at that time, the protection of the financial interests of the European Communities was a national matter, since it was based on the same domestic legal means provided for by the single Member States. . The assimilation principle was formally recognised by the Treaty of Maastricht.

Maastricht Treaty on European Union

LUISS Prof. Maurizio Bellacosa 41992 Maastricht Treaty on European Union or TEU In 1992, the Treaty on European Union is signed in Maastricht. The name "European Union" officially replaced "European Community". . Until the Treaty of Maastricht there was no specific provision concerning the Criminal Law protection of the financial interests of the Community. · The growing diffusion of the phenomenon finally led the Member States to provide a legal basis for the action against Community Fraud:

• Art. 209 A TEU: "Member States shall take the same measures to counter fraud affecting the financial interests of the Community as they take to counter fraud affecting their own financial interests".

This provision refers to the assimilation principle. The financial interests of EU were not considered yet as an autonomous value or asset to be protected through specific provisions coming from the European Union. Prof. Maurizio Bellacosa

Three pillar structure of the European Union

LUISS 5The Maastricht Treaty also created what is commonly referred to as the three pillar structure of the European Union:

1. First Pillar - the Community pillar, which corresponded to the three Communities: the European Community, the European Atomic Energy Community (Euratom) and the former European Coal and Steel Community (ECSC);
2. Second pillar - Common foreign and security policy;
3. Third pillar - Police and judicial cooperation in criminal matters.

In the Treaty of Maastricht, the fight against fraud was positioned in the framework of the third pillar. LUISS Prof. Maurizio Bellacosa

Added value of a criminal provision from the European Union

6The «added value» of a criminal provision coming from the European Union. . In the field of fraud affecting financial interests, the enactment of a criminal provision coming from the European Union may present an «added value» at least from 3 points of view

1. in order to avoid that the perpetrators of serious offences can take advantage from the differences among the States, committing the crime in the Nation with the less severe sanctions (so called phenomenon of «forum shopping»);
2. in order to ensure the certainty of the rules, both as a general right of all citizens and as a way to promote investments (the investor is encouraged to establish the business where the law provisions are clear);
3. to foster cooperation between enforcement authorities.

Practical example: the fight against Tax Fraud

LUISS Prof. Maurizio Bellacosa 7A practical example: the fight against Tax Fraud · Nowaday, the definition and the sanctions for the offence of Tax Fraud are quite different all over Europe.

• In the description of the crime, some Nations (e.g. Italy) require an element of deception, while other Nations don't (e.g. in Germany the same provision applies both to fraudulent and merely false tax declaration).

. Therefore, the perpetrator of a transnational tax fraud (as a VAT «carousel fraud») can decide to perform his illegal activity in the Nation with the less severe sanction. Prof. Maurizio Bellacosa

Convention on the protection of the European Communities' financial interests

LUISS 81995 Convention on the protection of the European Communities' financial interests . The European Union aims to combat fraud affecting its expenditure and revenue by taking appropriate criminal-law measures, such as criminalization of fraud, criminal penalties, criminal liability of heads of businesses and rules on jurisdiction. . Adopted under Title VI of the Treaty on European Union, the Convention on the protection of the European Communities' financial interests (Convention of July 26th, 1995 also known as "PEL Convention" i.e. Protection of Financial Interests; "Convenzione PIF" in the Italian version) and its protocols were aimed at creating a common legal basis for the criminal-law protection of the European Communities' financial interests. LUISS Prof. Maurizio Bellacosa

Merits and limits of the PFI Convention

9. The PFI Convention aimed at tackling fraud affecting the financial interests of the European Communities. Under the convention, fraud affecting both expenditure and revenue must be punishable by effective, proportionate and dissuasive criminal penalties in every European Union country. . The merits of the Convention: i) it provided for common definitions; ii) it laid the foundations for the minimum rules of the European Criminal Law. · The limit of this Convention: each Member State was free to choose the kind and the seriousness of the sanctions of the fraud. Therefore, the scope of equality of the penalties was far to be reached. Prof. Maurizio Bellacosa

Protocols to the Convention on financial interests

LUISS 10. The First Protocol (Brussels, September 27th, 1996) to the Convention on the protection of the European Communities' financial interests gave a_first definition of passive and active corruption. . With reference to the Council Act of 19 June 1997 drawing up the Second Protocol of the Convention on the protection of the European Communities' financial interests, the purpose of this Protocol was that the Convention needed to be further supplemented by a second protocol directed in particular at the liability of legal persons, confiscation, money laundering and the cooperation between the Member States and the Commission for the purpose of protecting the European Communities' financial interests and protecting personal data related thereto. Prof. Maurizio Bellacosa

Convention on the fight against corruption

LUISS 11Convention on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union (1997) · With the Convention of May 26, 1997 on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union (which entered into force on September 28th, 2005), the area of criminal liability is extended to every act of corruption which involves officials of the EU or officials of Member States. . The First Protocol (1996) to the Convention on the protection of the European Communities' financial interests was directed in particular at acts of corruption involving national or Community officials and damaging or likely to damage the European Communities' financial interests. · As we can see in point 3 of the preamble of the new Convention (1997), «it is necessary to go further than the said Protocol and to draw up a Convention directed at acts of corruption involving officials of the European Communities or officials of the Member States in general» > a criminal sanction should be introduced even for acts of corruption which do not directly affect the Communities' financial interests. Prof. Maurizio Bellacosa

Treaty of Lisbon and EU competences

LUISS 12hereafter some reminders of general notions: 2009 Treaty of Lisbon With the Lisbon Treaty - signed by the EU Member States on December 13th 2007, and entered into force on December 1st 2009 - the division into pillars of the European Union was abolished. As a consequence, the typical EU legislative acts of the EU have become regulations and directives. Art. 83 of the TFEU regards criminal law and, specifically, the European Union's indirect competences with reference to criminal law. Prof. Maurizio Bellacosa

Harmonization of criminal law through directives

LUISS 13· Art. 83, par. 2, TFEU contains a general clause which gives the EU competence for the minimum harmonization of criminal law through directives. . Directives are surely less effective than Regulations, but they have the merit to be more flexible. . The approximation of domestic criminal law must, however, be essential to ensure the effective implementation of a Union policy in an area which has been subject to harmonization measures. . The harmonization must improve the «effet utile> of the Union policies concerned. . This EU competence is also known as "annex competence". Prof. Maurizio Bellacosa

Legislative procedure for directives

LUISS 14. The directives shall be adopted using the same ordinary or special legislative procedure as the one used for the adoption of the harmonization measures in the non-criminal matters. . Example: VAT can be considered as an area subject to harmonization measures; is it possible to adopt criminal provisions under art. 83, par. 2, TFEU in order to fight Tax Fraud in the field of VAT? Yes, since the articles 110-113 TFEU provide for measures in terms of non- discrimination and harmonization for "indirect taxes" like VAT. Prof. Maurizio Bellacosa LUISS 15