The EPPO’s material scope of competence and non-conformity of national implementations

1. Introduction

The experience gained during the first year and a half of activity of the EPPO has essentially confirmed the fear expressed during the negotiations for establishing the EPPO and after the entry into force of the Directive on the fight against fraud to the Union's financial interests by means of criminal law (PIF Directive) ¹ : the very limited harmonisation established by the PIF directive (together with the interplay of relevant provisions of the EPPO Regulation ² with the national legislation of Member States) is able to significantly hinder the EPPO in effectively performing its duties as an authority charged with more than cooperation and coordination tasks.

The significant number of decisions issued by the College of the EPPO that expressly aim at establishing guidelines for the application of provisions of the EPPO Regulation (and through the reference to article 22 of the EPPO Regulation also of the PIF Directive) clearly shows the problematic gaps and the points of inconsistency of the legal context in which the EPPO is required to work. ³

It is very well-known that the present situation is a ‘genetical shortcoming’ of how the EPPO has been finally projected and established.

Indeed, both legal texts regulating the EPPO activity (i.e. the PIF Directive and the EPPO Regulation) appeared to be inadequate since their adoption. ⁴ In particular, the very limited scope of the PIF offences as defined in the Directive, together with the minimum harmonisation on liability of legal persons and limitation periods, as well as a lack of common definitions on ‘incitement’, ‘aiding’ and ‘abetting’, and of ‘attempt’ - which are crucial for defining the scope of competence of the EPPO -, imply that the Directive does not substantially overcome the pre-existing patchwork of legal solutions in the Member States in this field. Moreover, the overall picture of the EPPO’s activities appears to be even more problematic when one takes a look at the provisions in the PIF Directive in combination with the provisions in the EPPO Regulation dealing with the competence of the EPPO in the concrete case. It follows from the system of shared competence between the EPPO and the competent national authorities that once it is established that a concrete situation falls into the scope of competence of the EPPO, it is to be decided whether it is the EPPO that has jurisdiction over the case, or this remains with the national investigative authorities. These provisions of the EPPO Regulation give rise to situations of great complexity not only because of the interplay of the general rules with the many exceptions thereto (as provided in Article 25(3) of the EPPO Regulation), but also because of the vagueness and ambiguity of some of the crucial notions regulating this distribution of competence.

In addition to that, being the material scope of the EPPO established by referring to the provisions in the PIF Directive “as implemented by national law”, the exact scope of competence of this first European investigating and prosecuting authority finally arises out of national legislations. As a result, the latter becomes decisive in setting the boundaries of individual responsibility in the concrete case. As it was in the past under the force of the third pillar instruments (the PIF Convention and the two related Protocols), ⁵ the level and quality of implementation at national level remain crucial. The first report of the Commission on the implementation of the PIF Directive (Implementation Report on the PIF Directive) ⁶ did raise several critiques in this respect. Leaving aside the crucial topic of lack of necessary data and information from the participating Member States, ⁷ significant inconsistencies emerge with respect to a large number of Member States, resulting from incomplete or incorrect implementation of the Directive. As a matter of fact, a significant number of infringement proceedings have been launched by the Commission following the worrying findings of the Implementation Report on the PIF Directive.

This legislative technique radically affects the idea of protecting supranational interests, as well as the rationale itself of the EPPO as a true EU investigative body, and not merely a new layer to improve coordination among the competent national authorities. Participants in the negotiations considered the two texts to be a good achievement bringing an acceptable balance between the need for verticalization of investigation for PIF offences and the claim from participating Member States to preserve their competence and discretion in this field. Nevertheless, the outcomes of the negotiations appear to have completely stifled any ambition for two texts that should have been the most advanced piece of EU legislation in criminal matters, considering that they deal with the protection of the supranational interest par excellence. In the end, affecting Member States’ competences is the goal of a project aiming to overcome the current inefficiencies of the fight against crimes affecting the interests of the Union which are mostly caused by the limited harmonization in the field and the unacceptably large scope of discretion left to Member States’ authorities.

Against the original idea behind the establishment of the EPPO of centralising investigations and prosecutions about PIF offences in view of guaranteeing (or at least significantly improving) the effective protection of EU funds through a unitarian reaction against transnational offences to the EU budget, the persistent lack of homogeneity of internal legislation in this field represents an evident “Achille's heel” of the overall system conceived by the EPPO Regulation – not only with respect to provisions of substantive criminal law, but also concerning crucial aspects of criminal procedure.

Such a competence à géométrie variable, following the national legislations of participating Member States, results in an evident difficulty for the European Delegated Prosecutors (EDPs) in correctly identifying provisions in the relevant national laws implementing the PIF Directive, thus risking paralysing or inadequately handling investigations and prosecutions of PIF offences when facing a lack of implementation of the Directive by national legislation, or a non-complete or incorrect implementation thereof.

At present, only a truly effective coordination among EDPs, and between the EDPs and EPPO central level can help in finding solutions to overcome shortcomings inherent to this new judicial experiment, and face the many weaknesses of the overall system of the EPPO. Responding successfully to all the above challenges requires engaging the EPPO both at the central level (College, European Prosecutors, Permanent Chambers) and at the decentralised level (European Delegated Prosecutors and other national authorities in the participating Member States).

However, effectiveness of investigations in the PIF sector cannot be considered the exclusive goal of the EPPO system. A true improvement of the Area of Freedom, Security and Justice (AFSJ) according to the rule of law requires that this new system fully takes into consideration the position of the suspect in the framework of PIF investigations. Definitely, the present situation can be detrimental to the individual. The reference to the national law of the participating Member State where the investigation is conducted as the “applicable law” for the EDP in charge has the consequence that the suspect cannot know in advance for which conducts he can be held criminally liable and which penalties or coercive measures in general can be applied against him . As a matter of fact, the decision about the competent EDP, which in turn defines the applicable law, is not clearly foreseeable because of the ambiguity of some of the criteria spelled out in the Regulation. This means that the suspect cannot foresee the forum in which he has to stand trial. The persisting legal patchwork is both a substantial threat to the rights of suspects, and a substantial source of legal problems for the use of coercive powers by the EPPO.

Before looking at the major situations of non-conformity of national legislations with the provisions in the PIF Directive, and the consequences for the effectiveness of EPPO investigations (Section 4), this contribution will shortly expose the main inherent weaknesses of the legal landscape defining the EPPO’s material scope (Section 2), and the detrimental consequences that the present situation produces not only for the effectiveness of EPPO activities but also with respect to the position of the defendant (Section 3).

2. Inherent weaknesses of the legal landscape of EPPO’s material scope

Since its very first appearance in the document known as the Corpus juris for the protection of the financial interests of the Union, ⁸ one of the most challenging aspects of the proposed model for a European investigative body lied in the specificity that its structure and functioning largely builds on the national legal systems. Establishing a European investigative body essentially functioning through members of the national investigating and prosecuting authorities acting in their function of “European Delegated Prosecutors” appeared since the beginning as the only viable solution in terms of feasibility, and also the one reflecting the original idea of European integration. ⁹ In this respect, the institutional design of the EPPO could be considered a point of strength of the proposed model; although the way it has been realised in the EPPO Regulation risks turning it into a point of weakness of the system due to the fact that crucial decisions at the investigation stage are finally made at the national level, and by consequence do not bestow any new ‘supranational’ dimension on the EPPO. ¹⁰

However, the definition of the material scope of the first European investigative body by reference to the PIF Directive (and to the Framework Decision 2008/841/JHA on organised crime ¹¹ ) “as implemented by national law” is probably the most dramatic weakness of the overall system, together with the choice to define the competence of the EPPO for PIF offences as shared competence. These multiple references to national law and national jurisdicition require examining first whether the EPPO actually has jurisdiction in a concrete PIF case. Moreover, the inclusion in the EPPO’s material scope also of offences regarding participation in a criminal organisation (if the “focus” of the criminal activity of such a criminal organisation is to commit any of the PIF offences provided for in the PIF directive), and also of “any offence” (other than the PIF offences) “inextricably linked” to PIF offences provided for in the directive cannot but be absolutely welcomed in terms of effectiveness and coherence of the action of the EPPO. However, the lack of a precise definition in the same regulation of what is to be meant by the expressions “focus of the criminal activity” of the criminal organisation or of “inextricably linked offence”, tends to create a critical situation of uncertainty about the exact boundaries of the EPPO’s material scope. ¹²

The provision in Article 22 of the EPPO Regulation marks a decisive turning point with respect to the original model proposed in the Corpus juris, where the proposal for a European investigative body was joined with a rich set of common provisions, both of substantive and procedural criminal law. In particular, as for the substantive criminal law, eight PIF offences and the penalties thereof were defined and regulated, together with some rules on the general part of criminal law; therefore national law was called upon only for filling the gaps of the common provisions in a way of complementing EU law. ¹³

The solution in Article 22 reflects a clear political choice essentially lying on three interconnected factors: 1) a very cautious reading of Article 86 TFEU, the legal basis for establishing the EPPO; 2) the reference to national law as the ‘applicable law’ by the EPPO; 3) the adoption of the PIF Directive on the basis of Article 83 TFEU (instead of employing the legals basis of Article 325 TFEU as provided for in the Commission’s proposal ¹⁴ ), and then the establishment of (mere) “minimum rules” defining the PIF offences.

To recall briefly, Article 86 TFEU is silent about the adoption of common rules of substantive criminal law when referring to the main contents of the regulation establishing the EPPO (Article 86(3) TFEU). Strictly sticking to the principle of conferral, this is to be considered as a clear refusal by the Member States of an even very limited set of common provisions laying down true European criminal offences, which would in turn imply that a full criminal law competence would be conferred on the EU. ¹⁵ However, the very nature of the EPPO as a genuine European investigative body, together with a systemic interpretation of Article 86 TFEU in the light of the other provisions in the same title of the Treaty, would – and should – have entailed the need for a highly consistent legal context. ¹⁶ An extensive interpretation of the ambiguous wording of Article 86(2) TFEU, which provides that the EPPO is competent for PIF offences "as determined" by the regulations that shall set up the EPPO and regulate its functioning, could also militate in favour of a more cohesive approach requiring particularly to define PIF offences in the EPPO Regulation itself. Finally, the choice of setting apart substantive and procedural criminal law, and regulating them with different instruments (Regulation and Directive), appears ineffective, not to say unreasonable, in that the EPPO, which is supposed to operate as a single office, ends up dealing with offences that finally are regulated in different ways throughout the EU.

The reference in Article 22 of the EPPO Regulation to the PIF directive (and the Framework Decision on organised crime) ¹⁷ “as implemented by national law” clearly sets a difference of scale between the European dimension of the EPPO and the still confirmed national dimension of the law that this body is required to apply. National law remains the applicable law, even in the framework of investigations conducted by the EPPO. More precisely, the overall system of the EPPO is expected to rest – and function – on the persisting legal patchwork of 22 national criminal laws (as many as the Member States participating in the EPPO), as (hopefully) harmonised in compliance with the PIF Directive (and the Framework Decision on organised crime); while the greatest variety of national solutions continues to apply with respect to possible “inextricably linked offences” that have not been the object of any harmonising initiative at the European level. In light of the above considerations, two crucial issues are at stake as decisive for the smooth functioning of the EPPO: on the one hand, the level of harmonisation pursued (and occurred) by the Directive (and the Framework Decision); on the other hand, the level and quality of national implementation of the said instruments.

As for the harmonising effect of the Framework Decision on organised crime, one can just recall the unanimous view in the commentaries following the adoption of the Framework Decision, ¹⁸ stressing the significant novelty of establishing the first definition of “criminal organisation”, ¹⁹ but critically assessing the lack of true harmonisation as regards the definition of the conduct of “participation in a criminal organisation” (which Article 22 of the EPPO Regulation refers to). In this respect, the Framework Decision recalls both the main models present at the European level: the first providing for the individual liability for participating in a criminal organisation with the intent and knowledge of either the aim and the general activity of the organisation, or its intention to commit the offences; and the second establishing individual liability on the agreement with one or more persons about committing an offence, and requiring the actual commission of the latter. ²⁰ As a result, it gives rise to very different consequences in terms of structure and scope of criminal liability.

As far as the harmonising effect of the PIF Directive is concerned, its adoption on the basis of Article 83 TFEU (conferring the competence on the EU to adopt directives establishing “minimum rules”) clearly shows the political choice in favour of a minimum level of harmonisation; an approach that evidently clashes with the declared ambitious objective of laying the foundations for stronger protection of the Union’s financial interests through criminal law. The so-achieved very limited harmonising impact might undermine the main goal of the directive to improve the protection of the financial interests of the EU through a more coherent and effective reaction by the Member States to offences affecting the EU budget, as well as (because of the reference of article 22 of the EPPO Regulation to the PIF Directive) the smooth functioning of the EPPO that is required to apply national law.

The inherent limits of the PIF Directive adopted on the basis of Article 83 TFEU referring only to “minimum rules” has finally resulted in a mere ‘lisbonisation' of a fairly consolidated acquis in the PIF sector – as earlier stipulated in the PIF Convention and the two related Protocols ²¹ bringing about only few novelties with limited potential for a true improvement of the legal landscape in this field. Article 4 of the PIF Directive, for example, does mark an interesting step forward by adopting a non-formalistic approach in determining the subjective qualification of “public official” for the purpose of criminal law, including “any other person assigned and exercising a public service involving the management of or decision concerning the Union’s financial interests in Member States or third countries” (Article 4 (4)). However, on the other end of the spectrum the approach to the crucial topic of liability of legal persons remains absolutely softer, as the EU legislature has escaped the definition of a European model of an ex crimine liability of legal entities an approach that cannot but be considered a missed opportunity to advance European criminal law (also) in this crucial area of conducts affecting the EU financial interests. ²² The minimum definition in Article 6 of the PIF Directive is to be further criticised because of the insufficient guidance it provides on crucial aspects of the liability of legal persons – thus leaving a wide room to national legislature, for example, with respect to liability of the shell-companies which is not provided in many Member States, although they represent a recurrent tool in fraud schemes.

The very limited harmonisation provided for by the PIF Directive leaves considerable leeway to the national legislature when it comes to the implementation of the Directive. The existing diverging rules on sanctioning levels and on the definition of offences affecting the Union’s financial interests falling within the EPPO’s competence, consequently, continue to exist largely unaltered and therefore the definition of the offences falling within the EPPO’s mandate relies on a patchwork of different national laws.

It is worth noting that the vital need for consistency in the legal setting where the EPPO is required to work in has led the College of the EPPO to adopt very detailed guidelines for the interpretation and application of provisions in the EPPO Regulation, including inter alia for the afore-mentioned ambiguous notions of “focus of the criminal activity of the criminal organisation” and “inextricably linked offence”. These guidelines seldom result in the integration of the provisions in question, or in a quite creative reading whose consistency with the wording of the EPPO Regulation could be questioned. Notwithstanding their added value, it should be borne in mind that the guidelines of the College are binding only on the EPPO, and therefore cannot be considered as the most desirable way to overcome the uncertainty around the material competence of the EPPO. One could also argue that the situation may become even more complicated if a different interpretation is followed by the European Court of Justice (ECJ) in the framework of a preliminary ruling. As a matter of fact, this could happen in case where a national judge is called upon to rule on the evocation by the EPPO of investigations opened by national investigative authorities concerning an offence that could be qualified as an “inextricably linked offence”, or offences committed by a criminal organisation when its criminal activities cover PIF and non-PIF offences and he or she contests that the EPPO has jurisdiction on the case.

This state of affairs risks undermining not only the effectiveness of the EPPO’s action, but also the position of the defendant, and finally the overall legitimacy of the EPPO’s system. This patchwork of rules governing the EPPO’s function is bound to create significant friction not only with respect to the rights of defence but also to the principle of legality, enshrined as a fundamental right in the EU’s Charter, in so far as its central requirements of “accessibility and foreseeability” are seriously affected in the situation described above.

3. Implications on the functioning of the EPPO and the position of the defendant: the EPPO’s legitimacy at stake

The persistent lack of homogeneity of national legislations in this field has an absolutely essential impact also on the legitimacy of the overall system.

The definition of the material scope of the EPPO by reference to the PIF directive “as implemented by national law” puts an essential burden on the EDPs because of the need to correctly identify provisions in the relevant national laws implementing the Directive. Most often the EDPs cannot rely on a legal source which has been precisely adopted to transpose into the national legal system the offences falling in the competence of the EPPO. Many of the offences provided for in the Directive (when they affect the financial interests of the Union) were the object of previous harmonisation (such as corruption of public officials, use of false documents, custom taxes evasion, money laundering), and therefore the national legislature may consider that a specific piece of new legislation is not necessary, since internal legislation is deemed already in compliance with obligations flowing from the Directive. As a result, it will be up to the EDP to single out the various national – and pre-existing – provisions to be considered as implementing the PIF Directive. On this point, the obligation on the Member States established in Article 17 (2) of the Directive to communicate to the Commission “the text of the main provisions of national law which they adopt in the field covered by this Directive”, can support the EDP in this difficult task only to a limited extent. This can be explained by the fact that the complete reconstruction of the applicable law at the national level, in the view of assessing whether a case falls in the EPPO’s material scope, does not rely exclusively on the “main provisions” communicated to the Commission, but also on various other provisions concerning, for example, circumstances which have an impact on the definition of the material scope of the EPPO, thus being essential to set the entire legal framework governing the offences for which an investigation has been initiated.

The choice of the EU legislature to establish the competence of the EPPO as shared competence between the EPPO and national authorities, moreover, puts the burden of the challenging assessment of whether the conditions for exercising the EPPO’s jurisdiction laid down in Article 25 of the EPPO Regulation are met in the concrete case, on the national component of the EPPO. Indeed, once it is established that a concrete situation falls into the scope of competence of the EPPO, it is to be decided whether the EPPO has jurisdiction over the case, or the case remains with the national authorities.

On this point, some provisions of the Directive appear quite striking against the backdrop of the EPPO’s competence. One of these is the provision in Article 2(3) excluding the structure and functioning of national tax authorities from the effect of the Directive, that could result in emptying the very goal of the EPPO’s system, since these national authorities are among the ones required to inform the EPPO of concrete cases that could fall within its competence. Because of their varying nature and lack of cooperation, these authorities may not have an overall picture of the facts. This will make it harder for them to assess that the threshold of 10 million euros, required by the Directive for a VAT-related fraud (together with the transborder nature of the fraud) to fall into the scope of the Directive, is reached. As made clear, in this case the exercise of the EPPO’s competence depends on the assessment of national authorities and their prompt and complete reporting to the EPPO. The EDP, therefore, must rely on this information in order to decide to evoke the case from the hands of national authorities.

The provisions of the EPPO Regulation render the overall picture of the EDP assessment even more complicated. Multiple provisions of the Regulation have the objective of restricting the jurisdiction of the EPPO, by spelling out several conditions to be met before the EPPO can exercise its jurisdiction. This leads to an unsatisfactory situation, stemming from the ambiguity of the criteria themselves that are meant to provide guidance for the EDP when deciding to initiate or evoke an investigation (whenever He/She estimates that the EPPO has jurisdiction over the concrete case). The EDP is required to navigate into an intricate set of conditions, exceptions and counter-exceptions to the same conditions, lying on very ambiguous criteria such as the fact that the offence “caused or is likely to cause damage to the Union’s financial interests of less than EUR 10 000”; or that the case should be considered as “having a repercussion at Union level”; or that the specific type of offence could be a “serious threat to the Union institutions’ credit and Union citizen’ confidence”; or that EPPO is “better placed” to investigate or prosecute.

The reluctance of the EU legislator to provide clear and uncontested solutions leads to uncertainty, and risks that the EDPs adopt different approaches depending on their different interpretation. The resulting situation is in sharp contrast to the very idea of establishing a European Prosecutor’s Office.

One could argue that the ECJ could contribute to bringing more clarity about the EPPO’s material competence if requested to issue a preliminary ruling under Article 267 TFEU concerning the interpretation of the relevant provisions of the PIF Directive or EPPO Regulation. However, this is far from being the ideal solution in terms of smooth functioning of the EPPO, especially when taking into consideration that, according to the well-established case-law of the ECJ requiring a court or tribunal to ask for a preliminary question, ²³ the EDPs could not be recognised among those who could directly refer to the ECJ because of their status as prosecutors and not judges. Hence, only the national judge who has been asked to deal with a conflict of competence between the EDP and the national authority could do so. This means that the decision of the ECJ can arrive when the investigation has already been initiated; so that the burning issue arises about how to deal with investigative activities that had been conducted before the decision of the ECJ whenever the latter goes in the opposite direction with respect to the interpretation followed by the referring authority who has handled the case so far.

When turning to the position of the defendant in PIF investigations, it is easy to realise how detrimental the uncertainty regarding the material scope and the concrete competence of the EPPO can be to him/her. The defendant, especially in cross-border cases, faces great difficulty knowing for which PIF offences he/she can be held criminally liable and which penalties could be applied in all jurisdictions where he/she could stand trial. Due to the diverging national rules among the Member States, the same action could be considered a criminal offence in one Member State, but not in another; or it could be considered a criminal offence punishable in both Member States but under very different conditions as to the level of penalties, coercive measures to be applied, and possible special rules of procedure.

In addition, the choice of the competent EDP automatically implies the ‘choice’ of the national applicable law. The provisions in the Regulation appear rather ambiguous also on this point. Not only does Article 26 provide for possible deviations from the general rule it establishes to determine the competent EDP whenever this would be “duly justified”, without explaining though when this criterion is fulfilled, but also it fails to provide a clear definition even when establishing the general rule indicating as the competent EDP “the European Delegated Prosecutor from the Member State where the focus of the criminal activity is or, if several connected offences within the competences of the EPPO have been committed, the Member State where the bulk of the offences has been committed”. The EPPO Regulation does lack a provision stipulating the criteria according to which the EDPs may determine the Member State where the ‘focus’ of the criminal activity or the ‘bulk’ of the offences is, and in turn the EDP who is competent to initiate the investigation. In these cases, the EDP who first got the information will presumably open the investigation, provided that he/she considers that all the conditions to establish the jurisdiction of the EPPO are met, relying on his/her limited knowledge about the case; a decision that can be only overturned by a subsequent decision from the competent Permanent Chamber on the basis of more complete information (coming also from other EDPs than the one initiating the investigation).

Not only does this situation create the risk of forum shopping by the EPPO, which could somehow choose the law of a Member State which provides for a more extended scope of application of the relevant PIF offence or, more extended investigative powers and measures (for example telephone tapping), but it also undermines the fundamental rights of the defendant, namely the principle of legal certainty, the right of the defence and the right to a fair trial. All these key requirements, derived from the rule of law, are expressly established both in the European Convention of Human Rights (ECHR) and in the EU Charter. Together with the principle of legality, enshrined in article 7 ECHR, and under EU law in Article 49 of the EU Charter respectively, some crucial aspects of the right to a fair trial are at stake, namely the right to have the case decided by an “independent and impartial tribunal previously established by law”, stated in article 6(1) ECHR and article 47 EU Charter respectively. ²⁴

The situation appears to be even more sensitive when taking into consideration that the applicable law may change in the course of investigations, since, according to Article 26(5) of the EPPO Regulation, the competent Permanent Chamber, before a decision to prosecute is taken, may decide to reallocate the case, or to merge or split the case “if such decisions are in the general interest of justice”. ²⁵

By granting wide discretion to the Permanent Chambers to indicate the competent EDP, and the power to change the forum of investigation even when the investigation is already advanced, Article 26 of the EPPO Regulation seems to clash with the guarantees enshrined in Article 48 (2) of the EU Charter, establishing the right of the defence of anyone who has been charged, since any change of the Member State of investigation – and consequently of the applicable law – is going to significantly impact on his/her defensive strategy. In these cases, the defendant is required to prepare his/her line of defence at a later stage of the proceedings according to a different law compared to the one of the Member State where investigations had been initiated. In this regard, the principle of legal certainty risks being undermined as the defendant cannot foresee in advance the applicable law and the relevant penalties that he or she could be subject to. Likewise, the right of the defence is at risk as the defendant cannot prepare in advance his/her defensive strategy which may result in violation of the right to a fair trial. As a result, the national judge called to decide on the case may declare void the whole procedure on the ground that the defence rights have been infringed. Having this in mind, the Permanent Chamber should use its competence to reallocate the case only in truly exceptional cases provided that there are solid reasons to decide so.

Along with possible reactions from the Constitutional and Supreme Courts of the Member States, the above-mentioned observations could trigger a referral to the ECJ to assess the compatibility of these provisions of the EPPO Regulation with the principles enshrined in the EU Charter. This would put on the Luxembourg Court the difficult task to search for a possible interpretation able to overcome the above-mentioned potential clashes with these very fundamental principles, or declare the provisions of the EPPO Regulation in question void, which would inevitably impact on the legitimacy of the overall system.

4. Non-conformity of national law and room left to the EDP to interpret national law

As mentioned earlier, the choice of the EPPO Regulation to establish the EPPO’s material scope by referring to the PIF Directive “as implemented by national law” fails to get rid of national differences that resulted from the failure of the Member States to fully implement the PIF package of EU legal texts (the 1995 PIF Convention and the two Additional Protocols). To put it differently, the solution adopted does not overcome the risk of paralysing or inadequately handling investigations and prosecutions of PIF offences when the EDP faces a lack of implementation of the PIF Directive by national legislation, or a non-complete or incorrect implementation thereof.

Although it is disputed by some scholars, according to the ECJ’s well-established jurisprudence the obligation of consistent interpretation across the EU is binding not only on national judges, but also on any national administrative authority, ²⁶ and therefore the EDP is to be considered as bound by the said obligation (even in these legal systems where he/she is not considered as a judge according to the national legislation). That being said, the EDP is given a certain room to interpret the relevant national provisions as far as possible in compliance with the Directive, which would allow a consistent interpretation of national provisions even when no intervention from a national judge occurs, or before any national judge is involved in the case in its function of authority for judicial control over the acts of the national EDP.

However, the added value of consistent interpretation is de facto limited in light of the afore-mentioned constraints put on the EDP to refer to the ECJ for a preliminary ruling – with the aim of obtaining clarifications about the EU relevant provisions that could underpin in turn a possible ‘consistent interpretation’ of the national legislation in the PIF sector. Therefore, one could say that until the moment that a national judge comes up in the procedure, all investigative activities are being conducted in a situation of uncertainty; indeed, whenever the EDP, despite his/her doubts about EU provisions, has decided to go ahead with an ‘ambitious’ interpretation of the national law – in a way that it complies with the PIF directive – or on the contrary, he/she has decided not to prosecute because of the national law not covering this aspect of the case, the validity of his/her acts could be overturned by a subsequent preliminary ruling delivered by the ECJ upon the request of a judicial authority.

Apart from that, the principle of legality can add further barriers to the application of consistent interpretation as it does not allow any worsening of individual criminal responsibility coming directly from a directive (without being implemented through national law). ²⁷ In this case, the only possibility for the EDP is to inform the Commission accordingly so that the latter considers launching infringement procedures.

The Implementation Report on the PIF Directive has shown that the situation above is far from being marginal. ²⁸ Indeed, outstanding conformity issues have been detected by the Commission concerning mostly (but not exclusively) deficiencies in national legislation transposing the definitions of PIF offences.

As for the very articulated definition of “fraud” in Article 3 of the PIF Directive, the Commission identified non-conformity issues in almost half of the Member States because of the more narrow scope of national legislation with respect to some crucial features thereof, dealing with both the expenditure (fraud related to non-procurement-related expenditure (Article 3(2) (a)) and fraud related to procurement-related expenditure (Article 3(2)(b)), and the revenue sides (fraud related to revenue other than revenue arising from VAT own resources (Article 3(2)(c) and fraud related to revenue arising from VAT own resources (Article 3(2)(d)). Various gaps flow from a narrower definition or incorrect/missing transposition of key notions such as “false, incorrect or incomplete statements or documents” (which often only cover written documents), “resources of the Union budget”, “budgets managed by the Union, or on its behalf”, “non-disclosure of information” (very often not covered by national legislation), “non-disclosure of VAT-related information”, “misapplication of a legally obtained benefit” and “presentation of correct VAT-related statements for the purposes of fraudulently disguising the non-payment or wrongful creation of rights to VAT refunds”.

Further shortcomings relate to the definitions of other PIF offences, such as the elimination of the “breach of duty” as a constitutive element of the offence of corruption (while such an element is maintained in several Member States, thus significantly narrowing the scope of the offence); the definition of “public official” as covering also third countries officials, and also persons “seconded to the Union by a Member State or by any public or private body, who carries out functions equivalent to those performed by Union officials or other servants”, which are often not covered by national implementing legislation; and finally the offence of misappropriation which still is not provided for in several Member States. However, it is worth mentioning that in few cases transposition issues have arisen with respect to pre-existing definitions based on the previous PIF acquis, such as the definition of “public official” as covering also nationals of other Member States, or the scope of the offence of active corruption as encompassing the conducts of “promising”, “offering”, or “giving”, “directly or through an intermediary”, an advantage,” and “for a third party”; or some features of money-laundering. In this respect, the transition from third pillar to community instruments (i.e. directives) does bring added value because of the binding nature of the latter and the remedies provided for under EU law in case of non-implementation or incorrect implementation thereof by the Member States.

Last but not least, special mention should be made to non-conformity issues of national implementing legislation with the provisions concerning attempt and responsibility of legal persons. Regarding the former, some Member States have failed to criminalise the attempt to commit a number of PIF offences, such as subsidy abuse or some specific customs offence as well as misappropriation. As for the latter, several Member States have made? depended the liability of legal persons on the final conviction of a natural person, thus failing to implement one of the essential features of the (minimum) ‘European model’ of liability of legal persons in Article 6 of the PIF Directive; that is the liability of legal persons being independent of a proven liability of an individual person.

Conclusions

Despite the various concerns highlighted above about the EPPO legal framework, there are no doubts that the establishment of the EPPO has triggered a new dynamic in the European legal area, that could lead (hopefully) to further developments in the near future: the putting in place of the EPPO, indeed, can still be considered ‘work in progress’.

The decisions adopted by the College of the EPPO with the aim of identifying viable legal solutions to problems faced by the EPPO during the first year and a half of its activity show the dynamism and inner engagement to make the EPPO work efficiently. The several deficiencies that the members of the EPPO have experienced do clearly show the need for an intervention by the EU legislature to amend the EPPO Regulation. For the time being, however, a sound and sincere cooperation among the members of the EPPO (the central office and the EDPs), and between the latter and the competent national authorities – including national judges who are under the obligation to directly apply the EPPO Regulation – are the real cornerstone of the smooth functioning of the overall system. In this respect, the ECJ is going to play a crucial role – and will probably contribute to a ‘functional reading’ of many essential provisions of the EPPO Regulation in the framework of the preliminary ruling procedure. ²⁹

A new dynamism has also been prompted by the adoption of the PIF Directive, since any failure from a Member State to fully implement its provisions will engage the Commission to initiate infringement procedures. As a matter of fact, two ‘packages’ of infringement procedures have been launched by the Commission so far, in December 2021 and May 2022, involving 17 Member States. Relying on the intensive dialogue and support provided by the Commission at the initial stage of infringement procedures – the referral to the ECJ being considered a last resort – such procedures should end up stimulating the national legislature of the Member States concerned to improve the level and quality of the implementation of the PIF Directive in order to fully align their national legislation with the requirements of the PIF Directive. As stressed above, the non-conformity issues identified by the Commission so far involve essential provisions of the Directive, which implies that even the very limited harmonisation pursued by the PIF Directive has not been achieved. Therefore the current situation is far from being satisfactory with respect to the need to guarantee adequate and equivalent protection of the financial interests of the Union, which in turn undermines the smooth functioning of the EPPO.

However, it follows from the analysis in this contribution that the goal of establishing equivalent protection of the financial interests of the European Union across the EU could hardly be achieved even in case of full and correct transposition of the PIF Directive. Due to the implementation requirement, a directive in itself cannot completely eliminate the differences in the legal regulation of the Member States; hence, such a goal is clearly out of reach for a directive only setting out minimum rules, and therefore leaving a wide room of discretion to the national legislature when transposing its provisions.

As it has been shown, apart from the nature of its legal basis, there are several elements in the PIF Directive which prevent it from protecting effectively the financial interests of the European Union. Member States are entitled to maintain stricter rules (as is the case, in general, for criminal law directives adopted so far), in the sense that they are allowed to establish as criminal offences other conducts than those laid down in the PIF Directive, criminalise offences even when committed recklessly or by serious negligence, or define higher level of sanctions. As for the sanctions, the PIF Directive repeats the formula of the ruling of the ECJ rendered in the Greek Maize case, i.e. that the criminal offences have to be punishable by effective, proportionate and dissuasive criminal sanctions, complemented with the only obligation with respect to offences referred to in Article 3 and 4, to establish a maximum penalty of at least four years of imprisonment in case where offences involve considerable damage or advantage (generally over 100 000 euros). However, it does not define either the type, nor the level of the sanctions to be applied; therefore, the Directive leaves the Member States a great discretionary power to prescribe the applicable criminal sanctions with almost no impact on the currently existing diverging sanctioning systems. Moreover, the Directive fails to give a definition of incitement, aiding and abetting and attempt. In the absence of common autonomous EU definitions, the fundamentally different dogmatic approaches of the Member States relating to these concepts still apply, and therefore the same conduct could be considered punishable in one Member State while it could remain unpunished in another Member State. A similar conclusion can be drawn with respect to the very limited (though innovative) provisions dealing with the limitation period. The differences in the national criminal law regulations of the Member States relating to the limitation period can have a negative effect according to the ECJ, when the expiration of the insufficiently long limitation period results in de facto impunity of the perpetrators of the criminal offences affecting the financial interests of the European Union. In this case, according to the well-established jurisprudence of the ECJ, the Member State violates its obligations arising from EU law. ³⁰

In light of the above, it clearly emerges that both the type of the legal act of the PIF Directive and its minimum harmonization hinders the equivalent protection of the financial interests of the EU in the Member States, Therefore, even if the PIF Directive was fully and correctly implemented by the Member States, the existing significant differences in the criminal law legislation of the Member States would possibly persist. Although the establishment of common criminal law provisions appears to be unrealistic in the short term – inter alia because of the lack of a clear legal basis conferring such a criminal law competence on the EU legislature – a much more significant harmonisation of the relevant criminal provisions remains absolutely essential to truly improve the protection of financial interests of the EU. As long as a more homogenous definition of criminal offences, level of sanctions and other relevant provisions dealing with individual liability is not provided, the goal of an effective fight against fraud and other criminal offences against the financial interests of the EU will hardly be reached.

Now that the EPPO is in place, further harmonisation is also essential to address the challenge of making the EPPO operates properly.