Alan Shatter (Dublin South, Fine Gael) | Oireachtas source

I was about to say something else, but I fear it would lower the tone. I will be serious instead.

The original proposal for a directive of the European Parliament and of the Council on the fight against fraud to the Union's financial interests by means of criminal law was communicated by the Commission to the Council on 12 July 2012. Its aim is to replace what is known as the PIF Convention of 1995 and its protocols. The proposal contained a requirement for member states to criminalise various forms of fraud and corruption which damage the financial interests of the Union along similar lines to the 1995 convention. The Commission's proposal went further in addressing procurement-related offences, encompassing VAT, requiring mandatory minimum sentences, and requiring minimum prescription, or Statute of Limitations, periods. Most controversially, the Commission's proposal was based on Article 325 of the Treaty on the Functioning of the European Union, TFEU. A majority of member states, with the support of the Council's legal service, objected to Article 325 as a legal base for criminal law measures as they are of the view that such measures must be based on an article within Title V of Part 3 of the TFEU, encompassing Articles 67 to 89, inclusive, concerning an area of freedom, security and justice.

Following lengthy negotiations at working group, counsellor and committee of permanent representatives, COREPER, level, the Justice and Home Affairs Council, on 6 June, agreed a Council general approach on the proposed directive. I will now deliberately embarrass somebody who is sitting close to me by pointing out that this agreement was the result of very substantial work undertaken to resolve what had been a very difficult issue at European Union level during the course of the Irish Presidency. I am guessing that a member of my Department who is in this room is blushing at this stage. The Government has decided that Ireland should opt in to this general approach in accordance with Protocol 21. Under Article 29.4.7, the approval of the Houses is sought to that end.

The general approach is significantly different from the Commission's original proposal in a number of areas. The scope excludes VAT and is limited to expenditure in the form of grants and subsidies or cases where intention to make an unlawful gain or cause a loss can be proven. Procurement-related offences have been removed. There are no mandatory minimum prison sentences, only minimum levels of maximum sentences. The prescription provisions are significantly modified. Most importantly, the Council agreed the general approach on the understanding that the legal basis for the measure would be Article 83(2) of the TFEU. On foot of this agreement, the Council noted that 6 June would mark the commencement of the opt-in period for Ireland and the United Kingdom in accordance with Article 3 of Protocol 21 to the treaties. The general approach will form the basis for the Council's engagement in trilogues with the European Parliament and the Commission. The three-month period in respect of the proposal will expire on 6 September. The various changes of approach were necessary to effect agreement between member states and allow the instrument to proceed. As in all such cases, it was about finding a ground upon which member states, or at least a majority thereof, could generally agree.

The purpose of the draft directive is to move the basis for criminal laws to protect the financial interests of the EU from the 1995 PIF Convention to a basis under the provisions of the Lisbon treaty. There is an added significance to the proposed directive in that Article 86 of the TFEU provides for the possible establishment of a European public prosecutor's office, EPPO, which would have responsibility for investigating and prosecuting offences against the Union's financial interests. Participation in EPPO, if a proposal is advanced, will be optional for member states.

I will now set out the key provisions in the Council's general approach to the proposed directive. Article 83(2) is the legal base for the measure and is set out in the Preamble. VAT revenues are excluded, in Article 2, from the definition of the Union's financial interests as they are matters internally for member states. The definition, in Article 3, of fraud affecting the Union's financial interests is limited to expenditure in the form of grants and subsidies or cases where intention to make an unlawful gain or cause a loss can be proven. To clarify the legal jargon, the intention here is to ensure that where funding is provided by the European Union it is used for the purposes intended and is not fraudulently misused.

Article 4 provides for fraud-related offences affecting the Union's financial interests, namely, money laundering, corruption and misappropriation. It also provides a definition of "public official", which has a particular relevance for those offences. Article 5 addresses incitement, aiding and abetting and attempt to commit offences. Article 6 addresses the liability of legal persons. Article 7 requires that offences are punishable by criminal penalties. It will be a matter for member states to define serious offences in domestic law but these must be punishable by a maximum penalty of at least four years imprisonment. That is a maximum rather than a minimum meaning that an appropriate sentence could be handed down by a judge who might bear in mind the overall circumstances relating to any alleged offence of which someone is convicted.

Article 8 requires that the commission of offences as part of a criminal organisation shall be regarded as an aggravating circumstance. Article 9 addresses sanctions for legal persons. Article 10 relates to the freezing and confiscation of the proceeds and instrumentalities of offences. Article 11 requires member states to assert jurisdiction over offences committed wholly or partly in their territory or by their citizens. Article 12 requires a prescription - Statute of Limitations - period of at least five years for serious offences. Recital 19 clarifies that this is without prejudice to member states, such as Ireland, the UK and Cyprus, which do not set limitation periods. We do not have formal limitation periods and if someone commits an alleged offence and if evidence is available, he or she can be prosecuted in respect of that offence five, ten, 15 or 20 years later. This, of course, is subject to the views of the Supreme Court - as detailed in case law - with regard to issues of delay and prejudice.

Article 13 refers to the recovery of sums unduly paid. Article 14 is intended to ensure that the imposition of administrative sanctions provided for in Council Regulation No. 2988/95 relating to the Union's financial interests will not be prejudiced by the proposed directive. Article 15 provides for co-operation with the European Anti-Fraud Office. Article 16 provides for the replacement of the 1995 PIF convention for those member states participating in implementing the directive. Articles 17 to 20, inclusive, deal with transposition, reporting on implementation, entry into force and the usual formalities.

The following are issues which arise for this country. While the original Commission proposal contained some elements of concern to Ireland, such as mandatory minimum sentences and a legal base other than in Title V of Part 3 of the Treaty on the Functioning of the European Union, the general approach agreed by Council does not, we believe, present any significant difficulties for us. Much of the content of the proposed directive replicates the PIF directive of 1995, which was provided for in Part 6 of the Criminal Justice (Theft and Fraud offences) Act 2001. While a preliminary examination of the proposal in its current form indicates that Part 6 may need to be replaced, it is not envisaged that the replacement provisions will be substantially different to those actually contained in Part 6. When negotiations have been concluded, the final text of the instrument will be examined in conjunction with the Office of the Attorney General in order to establish the precise legislative requirements necessary to give full effect to the directive in Irish law. As already stated, because this is a directive rather than a regulation and in so far as it addresses issues for which we have not yet legislated, we will ultimately be required to introduce domestic legislation.

The proposed directive will bring the law in this area under the framework of the Lisbon treaty. It will further harmonise the approach across the EU to the criminalisation of fraud affecting the Union's financial interests. The interests of Ireland, as a member state, will be better protected by this measure and by our participation in its negotiation and implementation. Effectively, therefore, I am asking the committee to agree that we should opt-in and participate in the negotiations that will be undertaken with other member states in order to bring forward the final version of this proposed instrument. I am of the opinion that we should proceed as I have outlined and I commend the motion to the committee.