Abstract
This article aims to explore the key novelties of the proposal recently published by the Commission for a new Directive on asset recovery and confiscation and to offer critical reflection on certain issues. The proposed Directive intends to replace the previous Directive 2014/42/EU on freezing and confiscation and the Council Decision 2007/845/JHA on Asset Recovery Offices. The present article first clarifies the legal bases chosen for the adoption of this new EU legal instrument and shortly addresses some issues of compliance with the subsidiarity and proportionality principle. Then offers an overall analysis of the most important provisions (a) on the different asset recovery stages (asset tracing and identification, management, freezing and confiscation) (b) on the safeguards for the persons affected by such measures and (c) on the newly introduced obligation for the Member States to create a national asset recovery strategy. The article sheds also some light on the relationship between the proposed Directive and the violation of EU restrictive measures and finally concludes with some critical remarks, in order to contribute to the legal dialogue ahead of the final adoption of the new Directive.
Introduction
On the 25th of May 2022 the European Commission published, as expected,
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a new legislative package consisting, inter alia,
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of a proposal for a new Directive on asset recovery and confiscation in the EU
The proposed Directive intervenes in various ways: (a) substantively: specifying the existing rules and setting further minimum common rules for several asset recovery stages (tracing and identification, management, freezing and confiscation), (b) institutionally: broadening the powers of the Asset Recovery Offices
Once adopted, the proposed Directive would therefore constitute the sole harmonisation instrument in asset recovery and confiscation in the EU, alongside the Regulation (EU) 2018/1805
On the Choice of the Legal Bases
From a strictly legal perspective, the first thing to assess in new proposals for secondary EU legislation is the appropriate choice of legal bases to avoid subsequent institutional tension. 11 Moreover, choosing the right legal basis is paramount because of the harmonisation limits in criminal matters 12 set out in Arts. 82 et seq. TFEU. 13 What should be stressed in this respect is that the Commission is under no circumstances obligated to choose the same legal bases for new measures as it did for similar previous one. 14 In other words, new EU legal acts resulting from the development of earlier EU legislation and regulating similar issues do not have to be based on the same legal bases, especially when the EU legislator assigns to them new aims and content. This also confirms the case in point. The proposed Directive draws on the legal arsenal of EU primary law through Arts. 82 (2), 83 (1) and (2) and Art. 87 (2) TFEU, in contrast to the 2014 Directive based on Arts. 82 (2) and 83 (1) TFEU.
Considering the limits established by Treaty provisions under the title Area of Freedom, Security and Justice
Starting from Art. 82 (2) TFEU this offers the EU a legal basis to approximate certain areas of procedural criminal law, such as rights of individuals in criminal procedure (Art. 82 (2) (b) TFEU) and rights of the victims of crime (Art. 82 (2) (c) TFEU), through Directives designed primarily to facilitate cross-border cooperation. The scope of application of Art. 82 (2) (b) TFEU includes not only rights of the accused but also subjective rights of witnesses or experts as well other third parties rights, which are affected by criminal prosecution measures.
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Art. 82 (2) (c) TFEU covers the rights of the victims of crime and its scope of application is enshrined in the Directive 2012/29/EU,
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the so called Victims’ Rights Directive
However, two issues arise. First, Art. 3 (9) of the proposed Directive includes under the notion of ‘victims' apart from the victim’s definition mentioned above under Art. 2 (1) (a) VRD also legal persons who suffered harm by any offence within the scope of application of the proposed Directive. Taking into account the CJEU jurisprudence, 20 which excluded both legal persons and the state from the notion of ‘victims' under Art. 2 (1) VRD, it remains questionable whether the current proposed Directive can still find its legal basis on Art. 82 (2) TFEU for extending the meaning of ‘victims' to legal persons.
Second, it is unclear whether Art. 82 (2) TFEU is still the right legal basis when it comes to autonomous confiscation proceedings in criminal matters, namely proceedings in relation to a criminal offence. Is ‘criminal procedure' under Art. 82 (2) (b) TFEU susceptible to a restrictive or broad interpretation? Adhering to the letter of the law, Art. 82 (2) (b) TFEU refers to the approximation of procedural rights of the suspected or accused persons and other third parties but only in ‘criminal proceedings'. On the other hand, the scope of application of the proposed Directive (Art. 1 (1) of the proposed Directive in conjunction with Recital 5) is a much broader, ruling on asset recovery measures and the relevant safeguards within the framework of ‘proceedings in criminal matters'. The key to the argumentation for a broader understanding of ‘criminal procedure' under Art. 82 (2) (b) TFEU may be provided by the CJEU’s case law on the interpretation of the ‘ABC Directives'. 21 All six of them are based on Art. 82 (2) TFEU and emerged gradually and separately for each procedural right of the suspected or accused person by the EU legislator after the Council adopted a ‘Roadmap for strengthening procedural rights of suspected or accused persons in criminal proceedings' in 2009. 22 An argument can thus derive from CJEU case law, 23 where the Court ruled in favour of the extension of the scope of application of the Directive 2012/13/EU (right to information), Directive 2013/48/EU (right of access to a lawyer) and Directive 2016/343 (presumption of innocence) ‘beyond criminal proceedings'. In the case at hand, special judicial proceedings under the Bulgarian criminal procedural code concerning orders for the committal to a psychiatric hospital of a person who, at the conclusion of earlier criminal proceedings, was found to be the offender also fall under the scope of application of the previously mentioned Directives. 24 Therefore, if the CJEU accepts Art. 82 (2) TFEU as an appropriate legal basis for the above-mentioned ABC Directives, despite the extension of their scope of application ‘beyond criminal proceedings', there are reasonable grounds to evaluate the choice of Art. 82 (2) TFEU also for the proposed Directive, whose scope of application is extended to autonomous confiscation proceedings in criminal matters, as an acceptable choice.
As regards Art. 83 TFEU, this offers the legal basis for the approximation of substantive criminal law, namely criminal offences and sanctions. Art. 83 (1) TFEU was already chosen in the 2014 Directive as the legal basis for the harmonisation of freezing and confiscation measures related to the (non-exhaustively) listed Eurocrimes, as particularly serious cross-border crimes. 25 More precisely Art. 3 of the 2014 Directive restricted its scope of application, compared to the 2005 Framework Decision, 26 to a concrete list of criminal offences, accompanied by the legal acts providing for them and corresponding to the Eurocrimes in Art. 83 (1) TFEU. Also other harmonised criminal offences under secondary EU legal acts, expressly referring to the application of the 2014 Directive, fall under its scope of application. Yet, for the latter, no explicit reference to Art. 83 (2) TFEU was made as the relevant legal basis of the 2014 Directive. Moreover, the theory casts a critical eye on the need for an explicit reference to the application of the 2014 Directive in the text of other secondary EU legal acts harmonising different offences, especially when this is combined with the inconsistency and omission on the part of the EU legislature to always provide for such an explicit reference. 27
With regard to the proposed Directive both Arts. 83 (1) and 83 (2) TFEU appear clearly as its legal bases. In order to evaluate the EU legislator’s choice, we first have to examine the new scope of application of the proposed Directive in comparison to that of the 2014 Directive. Art. 2 (1) of the proposed Directive updates the list of crimes 28 and adds new offences such as illicit trafficking in weapons, munitions and explosives, fraud and other criminal offences against the EU’s financial interests, environmental crime and facilitation of unauthorised entry and residence. 29 The explicit inclusion of the above-mentioned crimes in the list of offences falling under the scope of application of the proposed Directive provides for more clarity and cannot but be endorsed as a correct choice by the EU legislator. It also reduces the earlier criticism that the EU legislator does not always provide consistently in secondary EU legal acts on the harmonisation of specific offences for an additional provision concerning the application of the 2014 Directive. The provision that the scope of application of the proposed Directive extends also to ‘any other criminal offences set out in other Union legal acts if they provide specifically that this [asset recovery and confiscation] Directive applies to the criminal offences defined therein' still remains under Art. 2 (4) of the proposed Directive, as in Art. 3 of the 2014 Directive. Art. 83 (2) TFEU is thus correctly added to the relevant legal bases of the proposed Directive.
One can therefore conclude that apart from the Eurocrimes listed in Art. 83 (1) TFEU, all crimes harmonised at EU level under Art. 83 (2) TFEU fall under the scope of application of the proposed Directive. Some of them are now also explicitly included in the list of crimes under Art. 2 (1) of the proposed Directive such as fraud against the financial interests of the EU, environmental crimes and the facilitation of unauthorised entry and residence. Both Arts. 83 (1) and 83 (2) TFEU are therefore correctly chosen by the EU legislator.
The complete novelty 30 is the extension of the scope of application of the proposed Directive under Art. 2 (2) to an exhaustive list of ten offences ‘committed within the framework of a criminal organisation'. 31 At first reading, given that the criminal area of organised crime falls within the Eurocrimes under Art. 83 (1) (2) TFEU, there seems to be no issue with the choice of this legal basis. However, offences committed within the framework of a criminal organisation cannot always be considered as ‘particularly serious cross-border crime'. For this reason, the detailed explanation in Recital 10 of the rationale for which the above-mentioned offences fall under the scope of application of the proposed Directive should be considered a positive step. It is namely not enough that the offences falling under the scope of application of Art. 2 (2) of the proposed Directive are ‘committed within the framework of a criminal organisation’. They should also ‘play a pivotal role in generating revenues and in enabling further crimes, including serious crimes with a cross-border nature'. From a legal/technical point of view these two limits to the broad interpretation of ‘organised crime', namely the elements of profit-driven offences and offences enablers of further (serious cross-border) crimes, should have been included in the text of Art. 2 (2) of the proposed Directive and not only in Recital 10. In this way there would be no room for inclusion in the scope of application of the proposed Directive of other offences, which despite being ‘committed within the framework of a criminal organisation’, they are neither profit-driven nor enable further (serious cross-border) crimes, such as murder or grievous bodily harm in the context of contract killings for the sole reason of a vendetta or kidnapping and illegal restraint or hostage for the sole purpose of intimidating the adversaries. Finally, one could question why the scope of application includes offences ‘committed within the framework of a criminal organisation' but only at a national level, which are not as such cross-border but just constitute the ‘enablers' of other serious cross-border crimes. 32 This poses the danger of an extensive interpretation of the scope of ‘organised crime' as a Eurocrime under Art. 83 (1) TFEU. 33 Last but not least, the idea that ‘organised crime', as such a Eurocrime, could be a ‘gateway' for the application of the proposed Directive horizontally to several other crimes beyond those categorised as Eurocrimes under Art. 83 (1) TFEU has already been pointed out and seen critically in the theory. 34
The last additional offence which falls under the scope of application of the proposed Directive, is the violation of EU restrictive measures against REPOs 35 under Art. 2 (4) of the proposed Directive, provided that it will first be added to the revised catalogue of Eurocrimes 36 following the procedure mentioned in the extension clause of Art. 83 (1) (3) TFEU. 37 However, two issues deserve particular attention: whether such violations can be considered ‘particularly serious cross-border crime' under Art. 83 (1) (1) TFEU and whether the new area of crime is based on an empirically provable crime development, considering the fact that such violations have probably not taken place yet but the EU legislator aims to regulate them preventively, should they arise in the near future. 38
A further issue that is coming back to the fore is whether new forms of confiscation without conviction, perceived as confiscation against property and not as an individual measure against a person, can fall under the notion of ‘sanctions' which can be harmonised under Art. 83 (1) TFEU. So far, theory has been critical of such a broad interpretation of the notion of ‘sanctions' in the above-mentioned competence norm as including, in addition to traditional sanctions (e.g. imprisonment and fine) and alternative personal measures (e.g. forfeiture and confiscation in personam) new legal measures in rem, which are dissociated from any individual criminal responsibility.
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It is therefore debatable whether Art. 83 (1) TFEU constitutes the appropriate legal basis for a more comprehensive non-conviction based confiscation
A newly added legal basis compared to the 2014 Directive, as already mentioned above, is Art. 83 (2) TFEU. This Article provides the EU with the competence to stipulate minimum rules on criminal offences and sanctions through Directives when the approximation of national criminal laws proves to be essential to ensure the effective implementation of an already harmonised EU policy area. The proposed Directive uses Art. 83 (2) TFEU as an additional legal basis to Art. 83 (1) TFEU in order to include all other crimes harmonised at EU level under this legal basis or its predecessors in the pre-Lisbon environment in its scope of application. 40 This includes frauds against financial interests of the EU, environmental crimes and the facilitation of unauthorised entry and residence. 41 Based on the explanatory memorandum freezing and confiscation measures are considered essential for the effective implementation of EU policy areas such as the protection of the financial interests of the EU or the environment and therefore their harmonisation can be based on Art. 83 (2) TFEU. 42 However, the overarching character of the proposed Directive, aiming at the harmonisation of asset recovery and confiscation measures related to several different criminal activities together with the new obligation for Member States to adopt a national strategy on asset recovery under Art. 24 of the proposed Directive can obscure whether asset recovery and confiscation are considered autonomously as such a relevant ‘EU policy area' under Art. 83 (2) TFEU in the need of an effective implementation. This would create an unacceptable circular argumentation in the context of the choice of Art. 83 (2) TFEU as the appropriate legal basis of the proposed Directive. In any case the EU legislator should be careful adopting Art. 83 (2) TFEU as a legal basis, taking into account the ultima ratio nature of criminal law measures. It is therefore necessary to thoroughly justify the ‘essentiality' of the approximation of national criminal law for the effective enforcement of an EU policy area.
Last but not least, Art. 83 TFEU provides solid the legal basis also for other measures supporting freezing and confiscation, such as the management of frozen and confiscated assets and the adoption of a national asset recovery strategy, followed by the introduction of cooperation mechanisms between national authorities and provisions on the necessary resources for the fulfilment of their tasks. These measures should be understood according to the explanatory memorandum as ancillary requirements supporting the effective implementation of freezing and confiscation orders and therefore also based on Art. 83 TFEU. 43
Art. 87 (2) TFEU appears also in the proposed Directive as a new legal basis compared to the 2014 Directive. In essence, Art. 87 TFEU offers the legal basis for police cooperation between the Member States. This Article should be understood in a broader sense as it focuses not only on the cooperation between the police authorities but among competent law enforcement authorities in relation to the prevention, detection and investigation of criminal offences (Art. 87 (1) TFEU). However, Art. 87 (2) TFEU contains an exhaustive list of police cooperation measures, which can be adopted through ordinary legislative procedure concerning (a) collection, storage, processing, analysis, and exchange of information, (b) training, funding, research and innovation and (c) operational cooperation. 44 Therefore, asset tracing and identification measures find their legal basis in this Article of the proposed Directive. More precisely, these include the immediate and direct access of specialised ARO staff to all relevant and necessary law enforcement information as well as operational cooperation between national AROs and AMOs, which contribute to the effective cross-border prevention, detection and investigation of criminal offences. Such measures should be also extended to the previously discussed violations of EU restrictive measures, if these constitute a criminal offence under national law. Yet, it is debatable whether such an extension of the AROs’ powers to urgently freeze property is still covered by Art. 87 (2) (c) TFEU as a common investigative technique in relation to the detection of serious organised crime.
All this being said, a more comprehensive justification of the use of the relevant legal bases in the explanatory memorandum or a revision of certain choices would be welcome in order to avoid institutional debates due to a serious extension of EU criminal law competences in the fields of asset recovery and confiscation.
On the Subsidiarity and Proportionality
The next question to be answered here, in continuation of the previous examination of the EU competence to criminalise in the fields of asset recovery and confiscation, is whether the EU or Member States are more suitable to rule on the issue (subsidiarity). The second question in the context of the justification of EU criminalisation, is whether there is a need for more extensive regulation of these fields (proportionality) and if the recourse to criminal law can be considered the last resort in the pursuit of the corresponding ends (ultima ratio). 45
The cross-border dimension of the organised crime, its complex and sophisticated methods is what makes, according to the Commission, 46 the pursuit of illicit gains from such activities admittedly more adequate at EU instead of national level in compliance with the subsidiarity principle (Art. 5 (3) TEU) 47 in the context of the shared competences 48 between EU and Member States in criminal law (Art. 2 (2) TFEU in conjunction with Art. 4 (2) (j) TFEU). Although this article cannot at this point provide a more extensive analysis of this principle, what should be noted is that its justification in the Commission’s proposal extends to only two short paragraphs and seems relatively deficient, which brings to the fore the need for a more substantial subsidiarity scrutiny, especially when it comes to criminal law matters. 49
The proposed Directive must also align with the principle of proportionality, meaning that should only regulate to the extent necessary for achieving its aims (Art. 5 (4) TEU). In the case at hand, the introduction of more effective asset recovery measures aims primarily to fight against organised crime and removal of the illicit gains from criminal organisations. Ancillary purposes can be seen in the enforcement of improved cross-border cooperation by reducing differences between the asset recovery systems through approximation and legal clarity through the introduction of more detailed and extensive asset recovery measures. Moreover, according to the explanatory memorandum, 50 the proposed Directive is compliant with the proportionality stricto sensu test, as the costs for adopting such measures on a national level are outweighed by the benefits deriving from enhanced cooperation against organised crime through the improved capabilities of the competent national authorities. The principle of proportionality is observed by the proposed Directive although its scope of application is broadened but at the same time limited for the most intrusive infringements of the rights of persons affected. For example, asset tracing and identification measures are only possible for profit-driven crimes, namely offences likely to generate substantial economic benefits, and the new forms of confiscation without conviction are only possible for serious crimes punished at national level with a penalty of more than four years and must also be likely to generate substantial benefits. However, more far-reaching measures might be needed to combat organised crime. If organised crime is classified as a main security threat for the EU, 51 the stakes are much higher and most legislative action against such a threat would more likely be considered automatically necessary in order to protect the EU’s common value of security. The logical concern therefore arises that we are being led into a vicius circle of cause and effect. Α more detailed explanation of how the proposed asset recovery and confiscation measures could confront specific aspects of organised crime in concreto would increase the quality of the legislative process and be more compliant with the proportionality principle.
A Comprehensive Approach on Asset Recovery Stages
The first point that should be stressed is that with the proposed Directive the EU takes a step towards more comprehensive regulation with the adoption of minimum rules for almost all stages of asset recovery (tracing and identification, management, freezing and confiscation). Prior to this, the EU’s legal instruments had mainly focused on freezing and confiscation issues. 52 Now it is much clearer that the EU legislator intends to create a shared asset recovery model, focusing on the relevant procedures in criminal matters 53 under which the measures are adopted, as the common denominator of harmonisation, instead of the approximation of the specific legal nature of the measures. The scope of application of the proposed Directive therefore only includes asset recovery measures adopted ‘within the framework of proceedings in criminal matters', in line with the previously examined selected legal bases especially from the area of the judicial and police cooperation in criminal matters.
A first observation is thus, that the proposed Directive aims to clear the landscape by unifying the various asset recovery phases (tracing and identification, freezing, management, confiscation, disposal) 54 under a single legal instrument and specifying more detailed minimum common rules for each stage (e.g. systematic launch of financial investigations during the asset tracing and identification stage, pre-seizure planning and interlocutory sales during the asset management stage, introduction of new extended non-conviction based confiscation forms).
Some uncertainties or shortcomings remain, however, regarding the freezing and disposal stages. First, the difference between freezing and seizure is still unclear. These terms appear to be synonymous and interchangeable in the text of the proposed Directive. 55 Second, the EU legislator hesitates once again to introduce mandatory minimum common rules on the last asset recovery stage, namely the disposal of confiscated assets. Art. 17 (2) of the proposed Directive, exactly as for the 2014 Directive, 56 is simply encouraging Member States (‘shall consider taking measures') to use confiscated assets in public interest or for social purposes. 57 The final destination of confiscated assets for direct social re-use from NGOs and civil society 58 determines the social legitimacy of this institution. 59 Therefore, the EU legislator should reconsider in the current legislative stage including further minimum common rules also for the disposal stage, 60 in keeping with its original aim of comprehensive regulation at EU level of all asset recovery stages without exception. There is therefore an inconsistency in the EU legislation. It is precisely due to the fact that the EU legislator, on the one hand, is seeking a comprehensive regulation of all asset recovery stages and, on the other hand, is either too ambiguous, blurring the notions of freezing and seizure, or not ambitious enough, hesitating to adopt minimum common rules also for the disposal stage.
Significant changes are made, however, to the other asset recovery stages, namely the identification and tracing, management, freezing and confiscation stage.
On Asset Tracing and Identification
The importance of introducing minimum common rules at this early stage of the tracing and identification of assets lies in the fact that it is a necessary condition for subsequent asset freezing and confiscation measures. Without the timely identification of the proceeds, the object of subsequent freezing and confiscation is also excluded. Quite often assets are located in different jurisdictions and their precise identification increases the need for joint cooperation between the competent authorities. Such ‘follow the money' financial investigations, especially when cross-border, are usually highly complex and time-consuming 61 and therefore require enhanced cooperation among the relevant authorities and alignment of their tasks. Under those circumstances the tracing and identification of assets in the EU was until now regulated mainly by the 2007 Council Decision ruling on cross-border cooperation among national AROs, entrusted with the relevant task of ‘tracing and identification of proceeds of crime and other crime-related property which may become the object of a freezing, seizure or confiscation order made by a competent judicial authority in the course of criminal or, as far as possible under the national law of the Member State concerned, civil proceedings'. 62
One major change is that under the scope of application of the proposed Directive fall asset tracing investigations in relation to specific criminal offences or asset tracing investigations carried out to prevent, detect or investigate criminal offences related to the violation of EU restrictive measures (Arts. 2 (5) and 4 (2) of the proposed Directive). The first include those offences which are likely to generate substantial economic benefit and are punishable under the national legislation by deprivation of liberty or a detention order of at least one year. Any such delimitation of the field of asset tracing investigations should be welcomed as respecting the proportionality principle.
Competent authorities for conducting such asset tracing investigations are the AROs. Member States, which have not yet established a central national ARO as a point of contact for the institutional cooperation among relevant law enforcement authorities should do so and must create at least one (Art. 5 of the proposed Directive). 63 It seems, however, that the definition of the AROs status as an administrative, law enforcement or judicial authority still remains, just as in Art. 2 (2) of the 2007 Council Decision, at the discretion of the Member States according to their national law and procedure. 64
An important novelty, as requested by the Council, 65 is the additional powers granted to AROs. These include, apart from the asset tracing investigations and information exchange under Art. 5 (2) of the proposed Directive, 66 temporary urgent asset freezing measures of a maximum of seven days (Art. 11 (3) of the proposed Directive) as well immediate and direct access to a wide range of information necessary for asset tracing and identification (e.g. bank accounts, centralised land registers etc.) (Art. 6 of the proposed Directive). On the other side, safeguards are provided concerning the conditions under which such access to information is to be granted (e.g. only when necessary on a case-by-case basis and from specialised staff - Art. 7 of the proposed Directive), setting only minimum rules so that Member States could provide for higher procedural safeguards under national legislation (Art. 6 (3) of the proposed Directive). Moreover, relevant data protection provisions have been adopted under Art. 8 of the proposed Directive in conjunction with the Directive 2016/680/EU on the protection of natural persons' personal data processing for criminal purposes. This shall ensure that AROs don’t misuse such extensive investigative powers and comply with relevant data protection provisions.
Finally, Art. 9 of the proposed Directive provides for more detailed rules of the exchange of information among AROs and other competent authorities, upon request and spontaneously. This includes the minimum information to be provided in a cross-border information request such as the reasons for the request, the targeted assets, the appropriate information exchange channel (SIENA) and the alleged grounds for refusal of such requests. Art. 10 of the proposed Directive provides strict time limits for a response to the information requests (7 days for normal requests and 8 hours for urgent requests) as deriving from the Council Framework Decision 2006/960/JHA. 67 However it remains to be seen in practice whether such tigh time frames can be respected.
To conclude it is self-evident why the EU intends to further harmonise this first asset recovery stage. This is in order to ensure the effective detection of all relevant assets and cross-border cooperation between relevant law enforcement authorities at an early point of financial investigations providing a firm basis for freezing and confiscation measures. In light of the rule of law a balance must always be kept between security and procedural as well as privacy and data protection safeguards. At this point the Commission seems to have shown the appropriate awareness, trying to keep a balance between the invasiveness of the asset tracing measures and the protection at this stage of the rights of the affected individuals.
On Asset Management
Until now, the EU common rules on the management of frozen and confiscated assets were not that advanced. 68 With the progressive use of freezing and confiscation instruments, it has become increasingly clear to Member States that there is a need to incorporate provisions in their national legislations for the effective management of assets so that they do not lose their value during those periods and can reach the final recipient intact. The main practical issue has been that frozen assets remain out of use for long periods of time until their final confiscation and meanwhile lose their value significantly. This asset stagnation is what the EU tries inter alia to correct with the proposed Directive, promoting a more proactive and effective asset management system (Chapter IV, Arts. 19 to 21 of the proposed Directive). Moreover, the importance of minimum common rules for all Member States governing the effective management of the assets so as to maintain their value is emphasised by the fact that the relevant law enforcement authorities will be mobilised to activate the freezing and confiscation procedure in cross-border freezing and confiscation cases only if the executing Member States have an incentive to add this revenue to the public treasury.
Assets in need of management are not only the one frozen until the confiscation decision but also those confiscated until their final disposal. It should be underscored that, as in the previous 2014 Directive, while management of ‘confiscated assets' was provided for in the title, the text only contained a provision for the management of ‘frozen assets'. Three major novelties can be observed in the regulation of the asset management stage: (a) pre-seizure planning (Art. 19 and Recital 29 of the proposed Directive), (b) interlocutory sales (Art. 20 and Recital 34 of the proposed Directives) and (c) the establishment of new specialised AMOs (Art. 21 of the proposed Directive).
For pre-seizure planning competent national authorities may have to first carry out a preliminary assessment of the costs incurred from the management of the future frozen or confiscated properties and of the best way to preserve and optimise their value before the actual freezing and confiscation. Interlocutory sales allow assets to be transferred or sold during their freezing period and before confiscation is ordered under at least one of the following circumstances: (a) frozen property is perishable or rapidly depreciating, (b) its storage or maintenance costs are disproportionate to its expected value at the time of confiscation, or (c) it is too difficult to administer or its management requires special conditions and there is no such immediately available expertise (Art. 20 (1) of the proposed Directive). In this stage all legitimate interests of the parties involved should be guaranteed (e.g. the owner’s right to be heard before the interlocutory decision or protecting the right of third parties buyers of sold property so that the property is not returned back to the previous (criminal) owner). An alternative option is also to charge the management costs to the beneficial owner of the frozen property (Art. 20 (4) of the proposed Directive).
The major novelty at an institutional level is the establishment of at least one national AMO followed by a detailed description of its tasks. These include efficient asset management directly or through assistance to other competent authorities and cross-border cooperation among other competent authorities. Its concrete status, like for the AROs, remains at the discretion of the Member States. Similarly, this allows them to be better suited to the internal administrative structures being either per se the only authority managing such property or providing support to other decentralised authorities assigned with asset management tasks.
Such asset management provisions, designed to preserve the economic value of the assets or minimise any losses, until said assets are held by the State or used to provide restitution for victims 69 are new, quite technical and detailed and can be considered one of the biggest gains of the proposed Directive.
On Asset Freezing
Of lesser but not negligible importance are the changes concerning the freezing stage. The need for faster freezing is clear, so as to prevent asset dissipation once the criminals know that their assets are under threat of freezing or confiscation. Art. 11 of the proposed Directive contains two novelties: First, it gives AROs the additional possibility of a temporary urgent freezing of seven days maximum until formal freezing is issued, extending their assigned tasks in comparison to the 2014 Directive. Second, in compliance with the proportionality principle, the assets may not be kept frozen if not necessary and, if confiscation is not ordered, they must be returned to the owner immediately. These two newly introduced provisions are a vivid example of the legislator’s attempt to strike the delicate balance between effectiveness and constitutionality of asset freezing.
On Confiscation Forms
A significant novelty is the extension of the scope of the proposed Directive to cover a wide range of confiscation forms within the framework of proceedings in criminal matters. One could say that, albeit with a slight delay, the EU tries to harmonise confiscation forms, which have already been subjected to indirect harmonisation, or as it is also called harmonisation through the side door, falling under the scope of the 2018 Regulation. 70 This Regulation concerning the mutual recognition of freezing and confiscation decisions has a scope of application extended to all confiscation forms, even those without previous conviction, and is therefore not limited to the confiscation forms regulated by the 2014 Directive. The confiscation forms already regulated as common minimum standards in the 2014 Directive included standard and value confiscation (Art. 4 (1)), a limited form of non-conviction based confiscation for illness or absconding (Art. 4 (2)), extended confiscation (Art. 5) and third-party confiscation (Art. 6). Still, one must not forget that these were just minimum common rules and national legislation may have already provided for more extensive confiscation forms. 71
The standard and value-based confiscation (Art. 12 of the proposed Directive) as well as third-party confiscation (Art. 13 of the proposed Directive) did not undergo any changes. The main novelties can be now identified in (a) the extension of the scope of application of extended confiscation (Art. 14 of the proposed Directive) to all criminal offences under Art. 2 of the proposed Directive, (b) the addition of other NCBC possibilities (Art. 15 of the proposed Directive) apart from illness or absconding, namely death, immunity, amnesty and prescription of a limited time period and (c) the introduction of the new UWC (Art. 16 of the proposed Directive) on a subsidiary basis when no other previous confiscation form can be ordered.
Some initial critical remarks can already be made mainly in regard to these extended confiscation forms.
Concerning extended confiscation, it is still unclear what exactly the EU legislator has in mind concerning the standard and the burden of proof. As for the former, the court must be ‘satisfied' with the illegal origin of the assets just as in the 2014 Directive, 72 which has already been somewhat interpreted as halfway between the criminal ‘beyond any reasonable doubt' and the civil ‘balance of probabilities' standard of proof. 73 As for the second, no clear mention was made in the 2014 Directive leading to an incoherence in the choices made by national legislators. 74 It is however more arguable that the EU legislator does not intend to impose an obligation to the Member States to reverse the burden of proof in the detriment of the affected by the confiscation measure person but tries to ease the burden of proof for the prosecution. 75 The model seemingly followed by the proposed Directive is that the prosecutor will have to work with legal presumptions of the illegal origin of the assets, such as the disproportion between the property to be confiscated and the lawful income of the affected person. 76 Still, there is no room to argue that a mere suspicion is sufficient, 77 as the EU legislator, more than before, 78 calls for the establishment of such presumptions by ‘specific facts and available evidence' (Art. 14 (2) of the proposed Directive). Moreover, it is also clearer that an overall assessment of the circumstances of the case is needed and disproportion constitutes just one of various indicators. 79 In addition, two last points should be highlighted. First, the extended confiscation under Art. 14 of the proposed Directive is now applicable to all crimes under its broadened scope. Such a tendency to broaden the scope of application was already evident in the 2014 Directive, where extended confiscation under Art. 5 (2) was provided not only for the explicitly mentioned crimes but for all crimes falling under the scope of application of the Directive under Art. 3 punishable by a custodial sentence of at least 4 years. Second, it seems interesting that there is no more mention in the proposed Directive of the possibility given to Member States to determine a certain time period during which the assets were acquired as a requirement for extended confiscation (e.g. all assets being acquired 5 years prior to conviction should be deemed of illegal origin). 80
Concerning NCBC, in contrast to extended confiscation, is limited to offences liable to give rise directly or indirectly to substantial economic benefit (Art. 15 (2) of the proposed Directive) and to those under Art. 2 which are punishable by deprivation of liberty of at least 4 years (Art. 15 (4) of the proposed Directive). 81 In other words, in order to guarantee a balance between effectiveness and proportionality such an extensive confiscation form is provided only for serious profit-driven crimes. The limiting aspect is that it can be ordered only when direct or value confiscation and third-party confiscation cannot be ordered. This incorporates its own conditions of subsidiarity. 82 It seems that the EU legislator casts aside its reluctance expressed in the final text of the 2014 Directive to regulate this form of confiscation in a separate Article by extending it to a wider spectrum of cases including legal and factual procedural obstacles for which the criminal proceedings cannot proceed (death, immunity, amnesty, time limit period) and even labelling it as NCBC. 83 Art. 4 (2) of the 2014 Directive was already criticised as insufficient to introduce an effective NCBC regime. 84 In any case it was far from what was conceived as traditional NCBC. This is on the one hand because the proceedings were directed against a person and not against the property itself. On the other hand, because of the still existing link to a criminal conduct. Namely, the underlying premise was that if the person was not ill or absent the already initiated criminal proceedings which now had to be terminated would have (probably) led to a criminal conviction. 85 This rationale remains present in the Art. 15 (1) of the proposed Directive, where it is explicitely mentioned that such NCBC is allowed in cases where ‘criminal proceedings have been initiated but the proceedings could not be continued'. Although with the newly added NCBC forms the link to individual criminal responsibility 86 seems to blur, we can still not speak about a pure actio in rem, when the initiation of criminal proceedings remains as a main precondition for this NCBC confiscation order. Therefore, the denomination of such a confiscation form as NCBC may be more confusing than helpful. Whatever the final label of this confiscation form, Member States may now after almost 10 years be more ready to accept such an arrangement in the Council, 87 considering that some of them have already gone beyond the minimum provisions of the 2014 Directive. 88
What can be perceived as a true actio in rem however, and as a further novelty is the introduction of an UWC form under Art. 16 of the proposed Directive. 89 This new confiscation form is based on the idea, which already exists in some national jurisdictions, 90 that if there is no way to prove that the illegal assets derived from a certain criminal offence then it is enough for their confiscation to prove their illegal origin usually with the aid of evidence facilitation and reversal of the burden of proof. Such an evidence facilitation role plays the presumption that the assets are of unexplained wealth. And this usually results from deducting from a person’s total lawful property what was legally acquired, so that the remaining sum is the presumed dirty money. The following paragraph summarises the preconditions for such an UWC order under Art. 16 of the proposed Directive: (a) no other confiscation order under Arts. 12-15 of the proposed Directive is possible (subsidiarity clause), (b) assets are already frozen under the suspicion of criminal offences committed within the framework of a criminal organisation and likely to produce direct or indirect substantial economic benefit, (c) the national court is satisfied 91 with the illegal origin of the frozen assets, namely of their derivation from criminal offences committed within the framework of a criminal organisation, even if no conviction for the latter is possible and (d) as previously mentioned for the NCBC, this kind of confiscation is not applicable to all crimes but is further limited to those under Art. 2 of the proposed Directive punishable by deprivation of liberty of at least 4 years. It should be highlighted that the satisfaction of the court should not be based merely on the disproportion between the value of a person’s wealth and the lawfully acquired gains but also on an overall assessment of the circumstances of the case through specific facts and available evidence and should be ‘substantial’. This was already brought forth in the theory 92 and seems to be correctly followed also under Art. 16 (2) of the proposed Directive. 93 It is however doubtful if such an extended confiscation form could find political consent in the Council, taking into account that some Member States are still very reluctant to adopt such confiscation forms followed by evidentiary facilitations and reversal of the burden of proof because they fear that their constitutional and criminal legal order might erode.
On the Safeguards
One may always start from the premise that freezing and confiscation measures constitute a limitation to the right of property -and not only- per se, as they deprive criminals from their assets and have also the potential to violate several procedural safeguards in criminal matters to respond to the demand for effectiveness. Any new legislative effort by the EU raises the million-dollar question of finding the right balance between effectiveness and guarantees concerning these measures.
One can first observe the Commission’s awareness of this issue in the proposed Directive. Newly introduced far-reaching measures are accompanied by safeguards. This can be seen for example in the right to be heard prior to an interlocutory sales decision (Art. 20 in conjunction with Recital 30 of the proposed Directive). Also before the adoption of confiscation orders under Arts. 15 and 16 of the proposed Directive, the affected persons have the right of defence, including access to the file and right to be heard on issues of law and fact (Arts. 15 (3) and 16 (4) of the proposed Directive). Persons affected by asset recovery measures have, besides the right to an effective remedy and a fair trial, the right to access to a lawyer including the relevant information as well the right of defence (Arts. 23 (1) and (8) of the proposed Directive).
In its Art. 8 the 2014 Directive already provided a set of safeguards to persons affected by freezing and confiscation orders. It recognised the right to an effective remedy and a fair trial, concretising it with provisions on the duty to communicate the measures and the relevant reasons to the affected persons after their implementation. This granted an effective possibility of judicial review to challenge the orders before a court and especially for extended confiscation in order to challenge the circumstances of the case, including specific facts and available evidence supporting the illegal origin of the assets. Moreover, all persons whose property was affected by a confiscation order should have the right to access a lawyer. In regard to third-party confiscation, third parties have the right to claim ownership or other property rights, and victims with restitution claims against a person with confiscated property should not be prevented from making their requests.
Under Art. 22 of the proposed Directive, the existing obligation to inform affected persons about the freezing and confiscation orders now extends to interlocutory sales orders. This provision requires communication immediately after the order including the reasons for the order, so that affected persons have clear grounds to challenge it before the national courts. A critical point to mention here is that Art. 22 only provides ex-post communication of the orders, which does not guarantee earlier protection before the adoption of the relevant measures. It should therefore be clear that the right of the affected persons to participate in the freezing and confiscation proceedings including their right to be heard should cover all freezing and confiscation forms, considering that such safeguards are granted for the more extended confiscation forms of NCBC and UWC under Arts. 15 and 16 of the proposed Directive (argumentum a maiore ad minus).
Apart from calling on Member States to safeguard the right to an effective remedy and to a fair trial (Art. 47 Charter) in asset recovery proceedings, Art. 23 (1) of the proposed Directive adds the right to defense (Art. 48 Charter) and in paragraph 8 the right of access to a lawyer for freezing and confiscation proceedings. For freezing orders the obligation for ex post judicial review is added if such freezing orders are issued under national law from another non judicial competent authority (Art. 23 (2) of the proposed Directive). Particular attention is also paid to confiscation proceedings conducted in absentia. 94 Therefore the utmost effort is made to find and inform the suspected or accused person in hiding about the relevant proceedings (Art. 23 (3) of the proposed Directive). Moreover, both the 2014 and the proposed Directive call Member States to provide for the effective possibility for the affected persons to challenge freezing and confiscation orders and the relevant circumstances of the case before national courts. The main novelty under Art. 23 (4) of the proposed Directive is that these circumstances are now explicitly concretised for specific confiscation forms. This should be understood as a major effort by the EU legislator to clarify that such confiscation forms should not be ordered based on mere suspicion but on concrete facts and evidence. These are indicators which, as previously mentioned, are also relevant regarding (factual or legal) presumptions of the illegal origin of the assets for extended confiscation and NCBC. 95 This is to be welcomed as an effort towards legal certainty and should be understood as a counterweight to the eased burden of proof of the prosecution, which on the one hand does not have to prove a concrete offence but may use presumptions which are on the other hand based on specific facts and evidence, avoiding any probatio diabolica.
Fortunately, some have called for the establishment of a proportionality clause as a common minimum rule in national legislation according to which confiscation should not be ordered when it is disproportionate to the seriousness of the offence or constitutes an undue hardship for the affected person (Art. 23 (5) of the proposed Directive).
Finally, the data protection safeguards (Arts. 6-9 of the proposed Directive in conjunction with Recital 17) act as procedural safeguards and especially counterbalance the extended powers of the AROs, which have immediate and direct access to a wide range of law enforcement information. 96 However, the short time periods under Art. 10 of the proposed Directive for answering information requests may support effectiveness objectives but may not enable a level playing field for desirable application of these data protection provisions.
To conclude, the more such measures are extended at EU level under the socio-political imperative to tackle organised crime and other serious cross-border profit-driven criminal phenomena and are increasingly invasive in regard to fundamental rights, the EU must at the same time ensure a level playing field for the exercise of procedural rights by affected persons. The proposed Directive provides for more specific safeguards compared to the 2014 Directive. It ensures an overall proportionality of the measures by pairing different asset recovery measures with strong safeguards. However, these are not enough to provide a clear map of which procedural rights and guarantees may be applied to legal practitioners for asset recovery cases. Among many issues for example it is not clear whether the presumption of innocence finds application in the extended confiscation cases at hand, which require a lower standard and eased burden of proof. This principle appears in the proposed Directive only in Recital 33 in the context of a general provision for the implementation of the Directive in line with the right to a fair trial, the right to an effective remedy and the presumption of innocence as enshrined in Arts. 47 and 48 of the Charter and not in the relevant Chapter V ruling on the applicable safeguards.
Asset Recovery Strategic Framework and Cooperation Provisions
Chapters VI and VII of the proposed Directive also contain additions, with which the EU calls Member States to adopt a more strategic approach towards asset recovery aiming at a more effective implementation of the asset recovery measures as a whole. More precisely, Member States are asked to proceed with a national action plan on asset recovery, which must be updated at least every 5 years and include certain common points. These include the relevant objectives, priorities and measures in the asset recovery area, the roles, responsibilities, and cooperation mechanisms among the competent national authorities as well the resources available to them and training, monitoring and evaluation of the goals achieved (Art. 24 of the proposed Directive). Noteworthy novelties are both the obligation to create national centralised registries for frozen and confiscated property to which AROs and AMOs are to have direct access for better management (Art. 26 of the proposed Directive) as well central level statistical data collection and sharing with the Commission (Art. 27 of the proposed Directive). The collection and disclosure of such empirical data on asset recovery had already been requested in the 2014 Directive 97 and its importance is repeatedly mentioned as a key factor to prove the effectiveness of confiscation as one of the most appropriate measures to tackle illicit gain from criminal activities. 98
Despite the ruling in the national action plan on the cooperation mechanisms between the different competent national authorities involved in the asset recovery process (law enforcement, tax, customs, judicial authorities as well AROs and AMOs), in Arts. 28 and 29 the proposed Directive regulates the relationship between AROs and EPPO, Europol and Eurojust as well between AROs and AMOs and their counterparts in third countries providing for better cross-border cooperation between all institutions involved in asset recovery.
The Relationship of the Proposed Directive with the EU Restrictive Measures
Although this article does not intend to dive deeper into the issue of the EU restrictive measures (or otherwise called targeted or smart sanctions) adopted under Arts. 29 TEU and 215 TFEU, especially under the current political pressure to adopt such measures in response to the Russian aggression against Ukraine, it is interesting to clarify the relationship between asset recovery and confiscation measures under the proposed Directive and any infringements of the EU restrictive measures adopted through several relevant Council Decisions.
99
As already mentioned in the introduction, the proposed Directive on asset recovery and confiscation is being adopted as a legislative package together with two other legal acts, namely the proposal for a Council Decision on classifying the violation of EU restrictive measures against REPOs as a Eurocrime under Art. 83 (1) TFEU
100
and the Commission’s communication to the Parliament and the Council towards a Directive in order to harmonise any criminal penalties against violations of EU restrictive measures.
101
If such a decision is unanimously adopted in the Council, with the consent of the European Parliament, it will be the first time in the post-Lisbon era that the list of Eurocrimes under Art. 83 (1) TFEU will be extended, also including violations against EU restrictive measures as a Eurocrime. Once this happens, the second step is the adoption of a new Directive for the harmonisation of the different Member States’ legislations on the criminal penalties adopted as a consequence of the infringements of EU restrictive measures.
102
What is of fundamental importance, however, for this article is that the above-mentioned measures complement
103
the proposed Directive, which extends its scope of application of asset recovery and confiscation measures to property related to violations of EU restrictive measures (Art. 2 (3) of the proposed Directive). At this point prominence should be given to the difference between on the one hand, asset freezing as an administrative measure and part of the EU restrictive measures, namely as an EU’s Common Foreign and Security Policy
A Step in the Right Direction?
The first thing to be commended in this new proposal is the choice to provide minimum common rules under a single legal act for almost all different asset recovery stages, ensuring a more systematic approach and legal clarity in the area. This should encourage national legislators to regulate the different but interrelated and interdependent asset recovery phases creating a national strategy as requested. Asset recovery shall thus be prioritised in the national criminal justice policy agenda of the Member States. All in all, it can be said that progress is being made towards the adoption of more dynamic and effective measures for almost all asset recovery stages, with the exception of the disposal stage.
However, when assessing whether the EU is moving in the right direction in the fields of asset recovery and confiscation, one may reflect on the frequent question, if a balance between increasing the effectiveness of the prosecution and cooperation and safeguarding the fundamental rights of affected persons is truly achieved. 106 The EU now aims for maximum approximation, introducing the most far-reaching rules so far on asset recovery by pursuing a common EU asset recovery model in proceedings in criminal matters, with less room for national legislators. These far-reaching rules can be summarised in the detailed regulation of the asset tracing and identification, the asset management and the introduction of new confiscation forms without conviction. This on the one hand aligns EU law with international obligations for more effective asset recovery measures deriving from several international instruments such as CoE Conventions and FATF recommendations. On the other hand, these new EU rules on asset recovery are not ‘clear and precise' in all cases nor do they manage to dispel earlier doubts such as the standard and burden of proof or the determination of a period of time during which assets may be confiscated.
Moreover, the idea of bringing together material regulated under the CFSP such as the EU restrictive measures against REPOs cannot but create confusion about the real need and purpose of expanding the criminal competences of the AFSJ. The idea of introducing violations against EU restrictive measures as Eurocrimes under Art. 83 (1) TFEU seems to run against the ultima ratio logic of criminal law. Criminalisation is only justified when all other alternatives have been exhausted 107 and therefore the approximation of EU criminal law should be approached with caution. It is therefore doubtful whether such criminalisation at EU level is even justifiable.
The EU criminal legislation resorts more and more to security reasons as justification. We have a society asking for security and the elimination of the risks especially under cross-border threats such as the globalisation of organised crime leading to more criminal law and far-reaching criminal law measures. 108 The main ratio behind the adoption of the proposed Directive is the prevention and fight against organised crime, as one of the main rising threats for EU security. 109 In contrast to the analysed extended scope of application of the proposed Directive one may observe that the such a fight against organised crime ratio, is being used as a ‘passepartout' and does not correspond to the intersectoral nature of the asset recovery and confiscation Directive, which extends its application to all serious cross-border crime. It would be therefore more consistent either to adapt the ratio respectively and clarify that is a fight against all profit-driven crimes or to limit the scope of application to offences related to organised crime.
It is still to be seen if such a courageous EU approach for the introduction of more extended asset recovery and confiscation instruments will be embraced or nuanced during the ‘Trilogues' negotiations.
Footnotes
Declaration of conflicting interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.
