#77: Bank relationships

The pressure on banks has increased tremendously by various regulators. These days banks are taking their anti-money laundering controls very seriously. After being firmly reprimanded a number of times by the Public Prosecutor’s Office and having paid their dues by high transactions, banks have set up extensive departments to carry out checks on the origin of transactions. These departments conduct numerous and intensive checks by asking customers a variety of questions based on extensive Know Your Customer (KYC) checklists. If the answers to those questions show that the customer is not complying with all the rules and requirements or if not all the questions are being answered, termination of the customer relationship can follow. And additional stricter legislation for banks is already forthcoming. This way of working is not only criticized by the bank’s customers, the banking world itself is also critical. Is the method overshooting its goal?

An example in which we believe the banks’ KYC controls are beyond the legal requirements is a case of a dermatologist who had been banking with ING Bank for over 40 years, both privately and professionally. During a Know Your Customer (KYC) investigation it was established that over a period of seven years more than € 200.000 of cash had been withdrawn from the private account and almost € 500.000 of cash from the business account. It is also important to mention that the dermatologist in question had been linked several times in the media to an infamous criminal in the Netherlands. Partly for this reason, the doctor was asked how he spent the cash money he withdrew.

His answer is clear. He used the cash payments in particular for the restoration of a building in France. He no longer has the invoices or receipts. The ING response is that the bank cannot verify the cash expenditure and for this reason the banking relationship will be terminated. The discussion in these proceedings was whether the bank may terminate the relationship if the purpose for which the cash was spent remains unclear while it is certain that the money was legitimately earned. According to us, the fact that the money was earned legally means that the money cannot be laundered. Money laundering is about concealing or disguising the criminal nature of the money, trying to bring ‘black’ money back into the white economy. Whereas in this case the suspicion is about the opposite situation, namely that ‘white’ money is supposedly used for criminal activities. According to us in this situation the bank is overachieving in its KYC controls, but it also shows that cash money is viewed as something criminal in general. Also the Court decided that the bank could terminate the relationship given the fact that the dermatologist could not proof where he spent his cash money on.

With new legislation coming up banks can even go a step further in which highly sensitive information about private life can be monitored through (PIN) transactions. This means that the bank takes an intrusive look into someone’s life. Examples include paying a therapist’s bill or pinning a drink at a specific bar. According to the Dutch Personal Data Authority (AP), the current proposals do not make it sufficiently clear which of the highly sensitive data may be used. Incidentally, the AP is not the only one concerned. The rest of the European privacy regulators, united in the European Data Protection Board (EDPB) also support the criticism.

In our practice we also see the effects of the anti-money laundering measures at banks. In some cases, the bank’s investigation is the starting point for other investigations by the Public Prosecutor’s Office and sometimes the Tax Authorities. Even in cases where there are no indications that criminal money laundering might be lurking, a discussion about money laundering can surface with far-reaching consequences. And that is unnecessarily harmful as far as we are concerned. It is good that more and more parties recognize that the controls cause a lot of unnecessary ‘collateral damage’, while there is no serious risk of money laundering. Preventing the possibility of certain data being involved in these investigations would be step forward.

What are your experiences in the rest of Europe?

If you would like to know more about the case-law we refer to, please reach out to us at boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl. We are happy to share an English translation and discuss any questions you might have on the topic.

#76: Trial agreements in the Netherlands

The desire for criminal proceedings to be more efficient is present among all those involved. Enforcement of criminal offences is more effective for society if proceedings do not take too long. In addition, suspects do not benefit from a long period of uncertainty and nor does the Prosecutor’s Office in terms of capacity. In February 2019, the Prosecutor’s Office in the Netherlands already expressed its desire to make trial agreements with the defense more often. The outlines of the possibilities and impossibilities slowly begin to unfold.

The desire to come to such agreements can be explained by the fact that once a case has gone to court, the Prosecutor’s Office cannot withdraw the case anymore. It is then up to the court to take a decision. Various developments in time could cause the Prosecutor’s Office to request a certain outcome of the case, however the court is not obliged to follow the Prosecutor’s Office. In this respect the Prosecutor’s Office expressed in 2019 that it wanted to start experimenting with trial agreements with the purpose of saving time and capacity. This would involve, for example, the public prosecutor limiting the scope of the investigation, followed by limited investigation requests  by the defense. There is no legal basis needed for trial agreements, but a draft instruction is being prepared by the Prosecutor’s Office that spells out the guidelines  under which trial agreements can be made.

The first experiences with trial agreements show that it depends on the court involved whether the Prosecutor’s Office and the suspect can count on support for their agreement. In addition, trial agreements seem to have the best chance of success if they help to “unclog” the criminal justice system. It is therefore preferable to make agreements with all parties and not, for example, with only some of the defendants.

In 2019 the Prosecutor’s Office also expressed a desire to come to agreements regarding a potential sanction, such as the duration of imprisonment: “A sentencing agreement is a joint request from the prosecutor and the lawyer of a confessing defendant to the judge.” The initial findings are a mix of positives and negatives. For example, also in 2019 agreements between the prosecution and the defense on the sentence in the so-called Cymbal case were submitted to the court. The court, however, disregarded these agreements and ordered a (much) higher duration of the imprisonment. In a recent case, the Arnhem-Leeuwarden Court of Appeal also did not follow the agreements made between the Prosecutor’s Office and the defense. The suspects in this case were accused of having defrauded the parties by promising them that they would be able to safely achieve high returns from investing in real estate in Poland. However, that money was lent to a Polish company without any security being obtained. The court emphasizes that a large number of victims are still experiencing the negative financial consequences of the defendants’ actions. The fact that the trial agreements would not lead to any certainty for the injured parties within a “very short period of time” played, among other things, a role in not accepting the trial agreements, as the defense indicated to be able to file an appeal at the supreme court with respect to the decision on the compensation of the victims.  

However there are also positive experiences. In another case, during a pre-trial hearing, it was the Rotterdam District Court who encouraged the Prosecutor’s Office and the defense to make agreements about the trial and the sentence. So they did and the court went along with their agreement after it had tested whether the trial agreements are fair, whether the suspect understands the trial agreements and whether they have been entered into voluntarily. This resulted in substantial save of time and money.

If you would like to know more about the case-law we refer to, please reach out to us at boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl. We are happy to share an English translation and discuss any questions you might have on the topic.

#75: Legal privilege in the Netherlands; an update

In Lawlunch #73 we wrote about an ongoing summary proceeding regarding the infringements on lawyer client privilege in a specific case. Last month the judgment was rendered. In the judgment it was confirmed that the right to legal privilege had been violated in this specific case. However, the judgment of the interim relief judge also contains a multitude of more general interesting points. We will highlight a few of these points in this Lawlunch.

First, a quick look back on the case: in March 2015 a search by the FIOD took place at an asset management company. On the same day, a defense lawyer informed the authorities that he would represent this company. In September 2015, on behalf of the Public Prosecution Service (PPS), the FIOD demanded, pursuant to Article 126ng/ug of the Dutch Criminal Procedural Code (DCPC), all email messages at the defendant’s external email provider. Following this demand, approximately 2 million files were handed over to the FIOD, including 3,115 email messages between client and lawyer. These files were viewed by several investigating officers. The case focused, inter alia, on the question whether it was up to the PPS (126aa DCPC) or to the investigating judge (98 DCPC) to review whether the data was covered by the lawyer client privilege.

In its judgment the Court ruled that the right to legal privilege had been violated in this specific case, but that it is indeed up to the PPS to review the data on legal privilege since it was demanded based on 126ng DCPC and not seized. The system in which a so-called ‘secrecy officer’ assesses whether the data falls under legal privilege, can itself be legitimate.

However, the court did find that the manual used by the PPS for dealing with information possibly subjected to the privilege was in conflict with Article 126aa DCPC. According to this manual, a staff member of the investigating authorities assesses whether the digital documents fall under the right of privilege, whereas according to Article 126aa of DCPC, the public (secrecy) prosecutor must take that decision. The PPS objected that this manual no longer corresponds to the current practice, but the judge ruled that the current practice of the PPS does not guarantee that the privilege of the lawyers, who act as plaintiffs in this case, is respected. Furthermore, the judge stated that the proposition is justified that there is at least a real risk that the privilege has been or will be violated in several criminal investigations. This is an important consideration of the Court. As a result, the state must disclose the future version(s) of the manual. A new, temporary manual has now been published by the PPS. A first look reveals that this manual still leaves a lot of questions unanswered, but it goes beyond this article to go into detail now.

In addition to the obligation to disclose the new manuals regarding the handling of privileged information, the interim judge concludes the judgment with a number of other pros and cons. It is explicitly stated that this judgment only relates to the situation that the special investigative power 126ng/ug Sv is used – thus not to seizure – and to (future) cases in which (one of) the Stibbe lawyers are involved. Within these frameworks, the following is decided:

  • The state may not use the power under article 126ng/ug (demanding certain data from the provider of a communication service) insofar as it concerns information that is covered by the right of legal privilege. The Court blamed the state for the fact that all email messages were demanded while it was already clear at that time that the defendant was being represented by a defense lawyer. “With that knowledge, the State could and should have prevented the violation of the privilege by instructing the provider company to provide only certain data of which – almost – it was certain that they were not privileged data.”
  • If an investigating officer in exercising the power under Article 126ng/ug comes across potentially privilege material, the public prosecutor must be notified without delay. If the prosecutor determines that the information is indeed covered by the privilege, destruction must be ordered immediately.
  • The destruction must be done in such a way that the information is no longer accessible. This may not be recovered later.

These considerations of the Court hold interesting questions in itself. Because how can digital data really be destroyed? Or will there always be footprints available? And in what way may the digital data be reviewed? May the public prosecutor take a quick look in the privilege data to review it or should all data be digitally filtered?

In any event, it turns out to be of great importance to always question the course of events in detail: who viewed the requested documents, and in what order? How quickly and in what way was the prosecutor informed that there was privileged material among the documents? When was destruction ordered? And how exactly was that order implemented?

Also very relevant is the consideration that the PPS should put a limitation in the demand at information upfront, instead of reviewing and destroying the documents afterwards. The PPS should formulate the demand in such a way that files which contain possibly legal privileged information fall out of the scope of the request. Here lies a task for the defense to check that not too much data is requested.

The last word on this has not been said. So to be continued!

Do you have any questions or would you like to exchange views with us? Please contact us at boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl.

#74: Is non-conviction based confiscation desirable?

This month, the Council for the Judiciary in the Netherlands (“Raad voor de Rechtspraak”) published its advice on the draft bill to strengthen the approach to subversive crime. The most striking point in this proposal is the introduction of non-conviction based confiscation (NCBC) in the Dutch law. This would make it possible to confiscate illegally obtained benefits in situations where there has not been a conviction. The Council for the Judiciary criticizes this proposal in its advice and urges the legislator to make substantial changes. And rightly so: the proposed NCBC procedure is, in our view, unnecessary and undesirable.

At the moment, the confiscation measure is only allowed under Dutch law once a suspect has been convicted for a crime. The draft bill would change that. NCBC can be used in situations where there is no concrete criminal offence, nor a known suspect, but when it is plausible that the object was obtained by criminal means.

The procedure is not a criminal but a civil procedure, which focuses on the criminal origin of the object instead of on the criminal liability of the entitled party. In this procedure, the government has to proof it is likely (plausible) that the object is related to criminal conduct. The rightful owner of the object can only prevent confiscation by providing an explanation that the object has a legal origin. In doing so, a statement that is “not highly improbable in advance” would explicitly not suffice.

The proposal to enshrine NCBC in law is based on the wish to seize criminal assets more quickly and effectively. The current approach is considered to be inadequate in this regard, as the burden of proof currently is on the state and the procedures are usually quite lengthy. However, the question is whether the NCBC would be more effective and whether this procedure would be the right solution.

Our colleagues Luce Smithuijsen and Linda Gruijthuijsen have argued before that on the one hand the current possibilities for confiscation appear to be sufficient to overcome situations in which there is an unknown suspect or a link between the alleged criminal assets and a specific criminal offence is lacking. A 2017 study by the Justice Ministry also found that the problems for which NCBC could provide a solution are limited in scope in the Netherlands. On the other hand, there is a risk that the application of NCBC will not only be limited to cases involving an unknown suspect or offence, but will also be used in cases where the Public Prosecutor has a suspect or offence in mind, but finds himself hampered by the criminal law presumption of innocence and burden of proof in cases such as in money laundering cases (Lawlunch #65).

The Judicial Council identifies these risks as well. The Council fears that NCBC will gradually be used not in addition to criminal enforcement, but as a replacement. The NCBC procedure is a tempting alternative to criminal law enforcement because it is faster and cheaper. In addition, the proposed NCBC procedure is not limited to the situation without a concrete suspect due to which criminal prosecution is not possible. This means that the NCBC procedure can be used to circumvent penal safeguards, according to the Council. This is not only undesirable in the light of the rule of law, but also with regard to efficiently combat crime.

The Council therefore advises to apply the NCBC procedure only in cases in which criminal law does not provide possibilities, but confiscation is still necessary and proportionate. We fully agree with this recommendation. But as far as we are concerned, the added value of this draft bill is not a given and therefore first has to be assessed thoroughly. After all, no one benefits from a bill which is not only undesirable, but also unnecessary.

Do you have any questions or would you like to exchange views with us? Please contact us at boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl.

#73: Legal privilege endangered in the Netherlands

This week a very important summary proceeding took place in the Netherlands in which the protection of lawyer client privilege played a central role. In a criminal investigation which has been ongoing for years now the lawyers managed to find out that several infringements were made on their legal privilege by the Public Prosecutor’s Service (PPS). These lawyers took action against this in the investigation against their client, but they also started several civil proceedings themselves as individual lawyers. Recently these procedures have led to the publication of an internal manual of the PPS, that describes how prosecutors and investigation teams should deal with possible privileged data which has been seized or came in their possession via other legal means. This manual brought a shock to the legal profession as, according to the lawyers, this manual shows that the prosecution is deliberately violating the right to privilege by reading the information, selecting the information to use in a criminal investigation or not and by not involving a judge in the process. The summary proceeding showed that the PPS has its own interpretation of the law, which – in our opinion – erodes the legal privilege and undermines our confidence in the rule of law.

Legal framework

There are two articles in the Dutch Criminal Code of Procedures (CCP) that relate to the handling of privileged information. The procedure set out in article 98 of the CCP dictates that in principle privileged information will not be seized and that an investigative judge has the authority to decide upon the seizure. This procedure has been finetuned in jurisprudence.

Article 126aa of the CCP deals with the situation in which data has not been seized but gathered by other investigative methods such as telephone taps or specific demands of information. Especially in this specific situation the PPS is of the opinion that no intervention is needed of the professional entitled to the legal privilege nor of an investigative judge.

In addition to these laws the Supreme Court has clearly stated that digital data, such as e-mails, should be treated in the same way as the legislator has set out the rules and regulations around letters and documents. Furthermore, the Supreme Court has ruled that in principle it is in first instance the professional entitled to the legal privilege who should assess whether data falls under his or her privilege. It is a judge and a judge only who can take a final decision on whether the document falls under the legal privilege.

The manual

The PPS manual deserves a thorough analysis of how the PPS deals with possible legal privileged information. But what it comes down to is that in specific circumstances a public prosecutor himself or special selected ‘confidential prosecutor’ – a function which is not recognized in the law – analyses the documents and decides whether the information is privileged information and can or cannot be used for the criminal investigation. To take this decision the public prosecutor or the ‘confidential prosecutor’ reviews the possible privileged information briefly, according to the manual. The PPS is of the opinion that only in specific circumstances the professional entitled to the privilege, or an investigative judge comes into play to review the possible privileged information and takes the decision whether this information is privileged or not. And this is where the legal discussion basically evolves around.

The discussion

The PPS claims to honor the lawyers legal privilege and states that the manual is not common practice. However, the PPS does claim to have the right to review possible privileged data if this data has not been seized but gathered via other legal means. The PPS explains its actions based upon the sole legal provision on this topic, while the lawyers are of the opinion that the method of operation by the PPS is clearly in violation with the law as interpreted by the Supreme Court.

We agree with the lawyers who pleaded that it is clearly set out why this interpretation of the law is contrary to the rules as formulated by the Supreme Court but also contrary to the wishes of the legislator.

For instance, the PPS ignores the parliamentary history of the law which states that investigative powers may not be used in such a way as to obtain privileged information through other investigative powers. The legislator was of the opinion that this was such a no brainer that no additional rules and regulations were needed. The PPS therefore ignores the explicit purpose of the legislator.

Was the legislator naïve? Perhaps. The PPS has so many methods to demand digital data via various ways that the law with regard to article 98 of the CCP can be circumvented. In this specific case for instance the PPS demanded all e-mail correspondence of a specific suspect from a hosting company. By doing this it received a ton of privileged information which a ‘confidential’ public prosecutor apparently reviewed, claiming this is legal based on article 126aa of the CCP.

 Conclusion

We highly question the statement of the PPS that this manual is not common practice and we feel that the PPS should be transparent about its methods of investigations at all time and should have published its working methods. Furthermore, we highly disagree with the interpretation of the law by the PPS. We are of the opinion that the PPS erodes the right to privilege relying on an outdated article in the law en by using this methods, grossly violates this right.  

#72: National “booster” to release seizures

Since the start of this legal blog, we have written about the uphill battle of challenging the seizures of assets and objects by the Dutch prosecutor in court more than once. Such a seizure can be challenged based on article 552a of the Dutch Criminal Procedural Code in an open court. The court can only apply a marginal check on the grounds of the seizure. The court will have to decide whether there is an interest for the investigation to maintain the seizure and whether it is highly unlikely that the court deciding upon the merits of the case will come to a conviction. Also, the court can be requested to decide whether the seizure is reasonable taking the value of the seized assets and the estimated damages of the criminal acts in consideration.

Of course, the law provides in article 116 of the Dutch Criminal Procedural Code that if there is no interest for the investigation to maintain the seizure, the Dutch prosecutor will have to lift the seizure. However in practice, the prosecutor hardly ever lifts a seizure based on this provision on its own initiative. It’s the rule rather than the exception that the defense has to actively file a motivated request for the release of assets. And it is also rather rule than exception that this discussion will have to be brought to court.

This practice results in an uphill battle against seizures by the Dutch Prosecutor’s Office. And it cannot be denied: the Dutch Prosecutor’s Office has an impressive track record of seizing assets and objects.

To our pleasant surprise, at the end of last year an article was published by a member of the Dutch Prosecutor’s Office acknowledging the lack of active checks whether there are reasons to justify the continuation of a specific seizure of assets. The article has the promising title: “Down with nonsense seizures”. It hits the nail on the head. It argues that no one benefits if objects or livestock are put under seizure and deposited without a second thought. Also since objects – such as “rusting cars” – are standing there losing their value.

The national seizure coordinator at the Prosecutor’s Office, Ms. Festen, writes what we are all thinking. Almost none of the officers, according to Festen, feel like digging into seizures which are in place and making decisions on whether or not to continue the seizure. It is perceived as a “hassle”. But unfortunately, this “hassle” does have significant consequences for defendants.

According to the publication, the Public Prosecutor’s Office has now recognized that it is expensive to store seized objects for a long time. This has triggered the desire to put things in order. It is unfortunate, incidentally, that the motives of the Public Prosecutor’s Office are not inspired by article 116 of the Code of Criminal Procedure, but apparently by economic considerations. There is now a guideline called ‘national booster of new working methods for seizures’. The title says it all. In addition, a directive has been issued to ensure that public prosecutors give better reasons for seizing assets. Furthermore, so-called periodic filter moments should be built in, in which a further interim assessment of the criminal interest in the seizure takes place.

This should not have been necessary, as article 116 of the Code of Criminal Procedure is clear enough. Nevertheless, these signals sound like sweet music. We have not yet noticed this new way of working in our practice, but we will wholeheartedly support these good intentions and – if needed – actively remember the prosecutors about them.

Do you have any questions or would you like to exchange views with us? Please contact us at boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl.

#71: It is gonna be an exciting new year

The last year has shown us that the Covid-19 pandemic has not stopped the practice of law. The developments in our practice at Hertoghs advocaten are enormous at the moment; from a new European Public Prosecutor’s Office to a multitude of new cases in the field of cybercrime and corruption. Cases where the laws are still unclear, and jurisprudence develops very fast. Wonderful new challenges for the year 2022 are thus on the horizon!

For now we wish everybody happy and healthy holidays! We wish to see you all in the new year.

All the best,

Mariëlle Boezelman & Judith de Boer

Hertoghs advocaten

#70: Speech is silver, writing is golden

In the pre-COVID world both suspects and witnesses were usually interviewed face to face in a Dutch criminal procedure. Over the past decade the interview via video conference has entered the toolkit, but face to face interviews were still most common. The idea behind this is that face to face interaction obviously gives more information than only words. Nevertheless, since COVID, written interviews in criminal procedures have begun to take off. Initially as a means to limit contacts and movements. But now it seems to have proven its own benefits.

One of the main arguments for face to face interviews is the believe that the interviewee will speak the truth. It is the belief that the suspect who is given the opportunity to put the answers on paper in his own time, and with or without a lawyer present, could easily adapt the facts to his own narrative. But does that belief actually make sense? By confronting a suspect with certain questions on the spot and putting him or her under a certain amount of pressure, answers might be provided more quickly. But that does not necessarily mean that such an answer also reflects the truth. As we all know, there is a long list of miscarriages of justice and false statements which indicate the lack of truthfulness in such answers.

In fraud cases there is also another risk in answering questions on the spot from the top of one’s head. Often the topic matters are complex, involving all sorts of figures and clauses in documents or records, which mostly date back many years. The chance that the interviewee can properly remember exactly what happened – on the spot from the top of his head – is small. The likelihood is that the answer is not in line with the facts just because nobody’s memory is so accurate it can remember numbers and dates from years back. This is not only problematic for the suspect, but also a risk for the investigating authorities. After all, their goal is first and foremost to find the truth.

To avoid giving an inaccurate statement, the suspect will often, whether or not on the advice of the lawyer, decide to invoke his right to remain silent during an interview. Witnesses however have an obligation to testify and cannot remain silent. They have to answer truthfully. Of course the witness can express that he or she does not remember the answer to the question, but this does not help the fact finding.

But these are not the only arguments against conducting a physical interview. The Dutch system does not work with verbatim interview reports. Usually there is not even a video or even an audio file of the interview recorded. Such records – other then in other jurisdictions – are not required by law. In practice such records are only made in exceptional situations. In the Netherlands, an ‘objective’ report of the interview is drawn up. The questions of the authorities are written down, as well as a summary of the answer of the interviewee. Of course, the interviewee and the defense are allowed to check what is stated in the report before it becomes final. However the only means the interviewee has to object against the content of an interview report, is to not sign it. This is of course tricky when it comes to the goal of finding the truth, especially since the Dutch criminal procedure grants great value to such reports drawn up by the authorities.

The worry that the interviewee can provide a wrong answer in a written interview is ill-founded. The witness always has to answer truthfully. Not doing so in writing could even be a criminal act. The same applies to a face to face interview, but only when the witness is put under oath. As far as the suspect is concerned, he is never obliged to answer or to answer the truth. Nor in a face to face interview, nor in a written interview.

An interview in writing turns out to be a proper alternative, particularly in complex fraud cases. It not only offers time to properly think of the answer to a question and to use own words to provide the answer. For a suspect, it even allows for a more proper reconstruction of the facts based upon documents. It also guarantees a truthful recording of the statement in the case file.

Do you have any questions or would you like to exchange views with us? Please contact us at boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl.

#69: EPPO goes shopping?

Political tensions within the EU are the order of the day. It seems that discussions about own sovereignty versus EU laws are here to stay. On the other hand the EU is working hard trying to harmonize laws and procedures. Fact is however that the EU still has a long way to go when it comes to unification on the various terrains, including criminal law. What is the effect of this for the young and blossoming European Public Prosecutor’s Office (EPPO)? Fact is that this organization has a very decentralized operation and every country has (slightly) different laws and procedures . Will this enhance the risk of EPPO going shopping in different EU countries?

Young and blossoming

The press publications about the first ongoing investigations of EPPO are a fact. On 20 October EPPO reported about 10 arrests in Germany, Italy and Bulgaria regarding suspicion of a criminal organization and evading taxes. The operation was led by a European Delegated Prosecutor (EDP) in Germany. On 1 October EPPO published about conducted searches in Austria regarding custom fraud, also led by a German EDP. And on 4 August EPPO reported about searches that were conducted in Germany, the Netherlands, Slovakia, Bulgaria and Hungary for a investigation into cross-border VAT fraud. It seems that the first investigations are focused on VAT and Customs fraud and have a German leadership. The material competence of EPPO with regard to VAT and custom fraud seems pretty straight forward. But are there any risks of EPPO going forum hopping given the material competence and the implementation within the national laws, and if so, what are they?

Material competence harmonized?

As explained in Lawlunch #66 the material competence of EPPO covers three different aspects. First,  EPPO can investigate and prosecute the so-called PIF offences; offences that are regulated in the PIF directive EU 2017/1317. VAT fraud is one of the crimes as described in the PIF directive. Second, the Regulation focuses on participation in a criminal organization, as long as the organization is focusing on committing PIF offences. Last, the Regulation covers criminal offences that are inextricably linked to crimes affecting the financial interests of the EU. One of the questions is of course why are the PIF crimes described in a Directive and not a Regulation. As a directive gives member states more freedom in the way these crimes are implemented. This makes it possible that the meaning of a PIF crime is slightly different in different countries. Legal certainty is at stake here.

This goes even more so for the interpretation of the second pillar of the material competence of EPPO, the so-called criminal organization with a focus on PIF offences. What does ‘focus’ mean? Does it need to be the prime focus of the organization? And what is the level of intent needed in for instance The Netherlands versus Germany? The same goes for the last category of crimes that falls within the material competence of EPPO regarding criminal offences inextricably linked to PIF offences. What does this mean? For instance, everybody knows that The Netherlands has a broad possibility to prosecute money laundering. Will the Netherlands be an attractive country for EPPO to prosecute inextricably linked crimes such as money laundering?

Or does EPPO prefer to prosecute a case in a country were, for example, the protection of the rights of a suspect are much lower. A comparative analysis of criminal procedural law is available to compare notes.

Forum shopping

This is all enhanced by the fact that EPPO has a choice of forum in cross-border cases. While in principle a case must be handled by an EDP in the country where the focus of the criminal activity is. However, until a decision to prosecute has been taken the central body of EPPO may reallocate the case in the general interest of justice. The risk of forum shopping might be a given. As long as harmonization within the EU is far from sight, the right to legal certainty of an EPPO suspect is just as far away.

Do you have any questions about the above or would you like to exchange views with us? Please contact boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl.


#68: An obligation to report to EPPO

On 1 June 2021, the European Public Prosecutor’s Office (EPPO) was launched. This moment was accompanied with a number of press publications, including one in which Chief Public Prosecutor Laura Kövesi announced that she would soon make public which cases would be opened first. An announcement hasn’t been made public yet. However, EPPO has notified in a press release of 16 July 2021 that it has already processed more than 1000 reports of EU fraud since 1 June 2021. These reports come from member states or other EU institutions, which are obliged to report cases that fall within the scope of EPPO’s work. Yet another reporting obligation, is this the only way how EPPO gets cases?

To answer this question, it is good to know the structure and organisation of EPPO and its material competences. We also refer for this to Lawlunch #66. The material competences are laid down in Article 22 of Regulation 2017/1939 (the Regulation) and Articles 3 and 4 of Directive (EU) 2017/1371 (the Directive). In short, EPPO has the power to investigate and prosecute offences that harm the EU’s financial interests. Briefly, these are i) procurement fraud involving EU funds; ii) VAT fraud involving at least two Member States and causing total damage of at least €10 million; iii) laundering of proceeds from the above offences and iv) passive and active bribery of (EU) officials. Article 26 of the Regulation allows the EPPO to investigate these offences if there is a reasonable suspicion under national law that an offence within the EPPO’s competence is being or has been committed.

Article 24 of the Regulation contains a reporting obligation: the authorities of the Member States must report ‘without undue delay’ any criminal conduct to the EPPO over which they might exercise jurisdiction. This obligation also applies to other bodies of the European Union, such as the European Commission and the European Parliament. In addition, the EPPO also encourages private persons to report cases to the EOM, at least according to the EPPO website.

There seems to be no sanction for not complying with the obligation to report. Nevertheless, the press release of 16 July 2021 shows that, for the time being, member states are obediently complying with the obligation to report EU fraud. The Regulation requires that reports are well-documented and contain at least a description of the facts, including an assessment of the extent of the (potential) damage, the possible legal qualification, and any available information on potential victims, suspects and other involved parties. On the basis of this information, the EPPO then decides whether to open an investigation on its own. Article 40 of the EPPO’s Rules of Procedure show that the EPPO is bound by a number of assessment criteria. Only then does the EPPO open its own investigation.

Naturally, it may be the case that the Dutch Public Prosecution Service, in response to a suspicion, has already started its own investigation, ‘on its own soil’, into facts that also fall within the competence of the EPPO. In such a case a Member State must notify the EPPO so that it can assess whether it wishes to invoke the right of evocation. In that case, the Member State should transfer the case to the EPPO and the EPPO will continue the investigation. In assessing whether the right of evocation is invoked, the EPPO is again bound by the assessment criteria in the Rules of Procedure. Moreover, the assessment must take place within a period of five days, which may be extended by another five days. Is this period exceeded, then this will be interpreted as a consideration not to ‘evoke’ the case.

As of 16 July 2021 the EPPO has processed the first 1000 notifications, of organisations and possibly also private persons which seem to have found their way to the EPPO. But it remains to be seen whether the EPPO can actually act on the information reported and will open its own investigations or take over investigations.

Do you have any questions about the above or would you like to exchange views with us? Please contact boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl.