Explanatory Memorandum to COM(2004)559-2 - Conclusion of the Agreement with Switzerland to counter fraud and all other illegal activities affecting their financial interests

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dossier COM(2004)559-2 - Conclusion of the Agreement with Switzerland to counter fraud and all other illegal activities affecting their financial ...
source COM(2004)559 EN
date 16-08-2004
Background of the negotiations

The negotiations for an Agreement between the European Community and its Member States, of the one part, and the Swiss Confederation, of the other, to combat fraud and all other illegal activity to the detriment of their financial interests were conducted by the Commission following the authorisation given by the Council on 14 December 2000.

The Commission respected fully the negotiating directives attached to the Council decision by taking into account, in particular, the current acquis communautaire and its future development in the area of co-operation.

This is specifically reflected in Articles 7 and 25 of the Agreement where it is stated that more favourable provisions of bilateral or multilateral Agreements between the Contracting Parties are not affected by the provisions contained in the Agreement.

This is equally the conclusion achieved in the European Union-Switzerland summit on 19 May 2004 (www.europa.admin.ch/nbv/medien/2004/d) when it was agreed that: 'concerning the Agreement on cooperation against fraud, both sides will grant each other full judicial co-operation and administrative assistance on fraud and all other illegal activities, including customs and indirect tax offences in connection with the trade of goods and services. Co-operation against money laundering will be improved considerably, covering in particular also serious cases of fraud and smuggling'.

Administrative cooperation will be granted in accordance with the standards of the Convention on mutual assistance and cooperation between customs administrations, OJ C 24, 23.1.1998, p. 2 (the Naples II Convention). Judicial cooperation by means of coercive measures (search and seizure) will be subject to the dual criminality requirement as set out in Article 31 of the Agreement, a provision corresponding to Article 51 of the Convention Implementing the Schengen Agreement (SIC), OJ L 239, 22.9.2000. Should dual criminality for letters rogatory for search and seizure be abandoned in Schengen in the future, the new Schengen rules will fully apply in areas covered by the present Agreement. According to the summit conclusions referred to above, Switzerland has been granted in the Agreement between the European Union, the European Community and the Swiss Confederation concerning the latter's association with the implementation, application and development of the Schengen Acquis a derogation concerning the acceptance of future acquis related to letters rogatory for search and seizure only in the field of direct taxation.

Cooperation on matters of money laundering will be granted in line with the material scope of Directive 91/308/EEC on prevention of the use of the financial system for the purpose of money laundering (OJ L 166, 28.6.1991, p. 77) as amended by Directive 2001/97/CE (OJ L 344, 28.122001, p. 76), which refers in its Article 1 to the concept of serious fraud as defined in Article 2 of the Convention on the protection of the European Communities' financial interests (fraud punishable by penalties involving deprivation of liberty which can give rise to extradition).

Contents

1.

Provisions of the Agreement


Title I: General provisions

* Articles 1 and 2 - 'Subject matter' and 'Scope'

These Articles define the subject matter and scope of the Agreement, covering administrative assistance and judicial cooperation for the protection of the Communities' financial interests and certain financial interests of the Member States.

Within the scope of the Agreement the terms 'fraud and all other illegal activity' extend to all tax (VAT and excise duties) and customs offences (including smuggling), corruption, bribery and laundering of the proceeds of the activities covered by the Agreement subject to Article 2 i. Money laundering is also covered if the predicate offence is punishable by custody of more than six months, which includes in particular tax fraud and professional smuggling (EU-Switzerland summit conclusions of 19 May 2004).

The first indent of Article 2(1)a makes reference to 'trade in goods' irrespective of whether the goods pass through the territory of the other Party (departure, destination or transit). The scope of the Agreement extends to tax offences connected with trade of both goods and services. The term 'trade' referred to in the second indent of Article 2(1)a is understood irrespective of whether goods pass through or the services have a link with the territory of the other Party (departure, destination or transit)- (EU-Switzerland summit conclusions of 19 May 2004).

Article 2 i states that cooperation may not be withheld on the sole ground that the legislation of the requested Party does not contain the same legal classification of the facts as the legislation of the requesting Party. This means that the application of the Agreement is in principle not subject to the dual criminality rule which only applies in the framework of Articles 31 and 32 of the Agreement (EU-Switzerland summit conclusions of 19 May 2004).

* Article 3 - 'Minor cases'

This Article intends to avoid being faced with an excessively high number of assistance requests relating to minor points.

It takes over the content of Article 50 i of the Convention Implementing the Schengen Agreement, OJ L 239, 22.9.2000, p.19 (henceforth SIC). However, in respect of judicial cooperation, Article 50 i SIC and Article 3 of this Agreement will no longer apply with the entry into force of the Protocol of 16 October 2001 to the Convention on Mutual Assistance in Criminal Matters between the Member States of the European Union for Switzerland since Article 8 of the Protocol will replace Article 50 SIC. The Protocol will enter into force for Switzerland at the latest on the date of its entry into force for the fifteenth State, being a member of the European Union at the time of the adoption by the Council of the Act establishing this Protocol.

* Article 4 - 'Public order'

This Article includes the relevant grounds of public order in accordance with the cooperation Agreements, in particular, with Article 2b) of the European Convention on Mutual assistance in Criminal Matters of the Council of Europe (Strasbourg 20.4.1959).

Banking secrecy does not constitute a reason for refusing mutual assistance in the sense of this Article.

* Article 5 - 'Transmission of information and evidence'

This Article allows exchange between the Member States and with the Commission of information and evidence obtained from Switzerland and vice versa by way of the assistance provided for by the Agreement.

Article 5 i makes reference to the rule of confidentiality to which officials are bound. Article 5 i reflects the subsequent transmission of information and evidence received by the requesting Party as a consequence of the assistance provided by the requested authority. Article 5 i ensures the effectiveness of this subsequent transmission of information.

* Article 6 - 'Confidentiality'

This Article refers to the confidentiality requirements applying to the handling of assistance requests by the requested Party.

2.

Title II: Provisions relating to administrative assistance for the protection of financial interests


* Article 7 - 'Relationships with other Agreements'

The anti-fraud Agreement does not repeal the Protocol on mutual assistance in customs matters signed with Switzerland, OJ L 169, 27.6.97, p. 81 which can continue to apply, especially for customs aspects outside the scope of the anti-fraud Agreement.

* Articles 8 and 9 - 'Scope' and 'Powers'

These Articles of the Agreement correspond to Articles 1 to 3 and 8 of the Convention on mutual assistance and cooperation between customs administrations, OJ C 24, 23.1.98, p. 2 (henceforth the Naples II Convention).

Administrative assistance under the Agreement corresponds to the standards of the Naples II Convention as far as appropriate. This includes the use of information for the purposes of the Agreement (see Article 19 of the agreement) (EU-Switzerland summit conclusions of 19 May 2004). The anti-fraud agreement's scope goes beyond the exclusively customs-related scope of the Convention. The provisions of the Agreement will apply within the limits of the powers conferred by national law on each authority concerned in the framework of national proceedings, and do not amend or extend these powers.

* Article 10 - 'Proportionality'.

This Article reflects the concern already contained in Article 3 but within the limits of the administrative assistance.

* Article 11 - 'Central Departments'

This Article of the Agreement is in line with the content of Article 5 of the Naples II Convention and reflects the negotiating brief's requirement for clear identification of the relevant authorities at central level.

The central departments empowered to process the requests for administrative assistance are designated by each contracting Party.

* Article 12 - 'Request for information'-, Article 13 - 'Request for surveillance'- and Article 14 -"Notification and transmission by post" i and i.

These Articles of the Agreement are in line with the content of Articles 10, 11 and 13 of the Naples II Convention.

* Article 14 i aims to ensure that grant recipients and contractors for the Communities residing in Switzerland may be contacted directly by the awarding institution and may respond to requests for documents and information directed to them by the latter in connection with the grants and contracts concerned. In the absence of any basis in an international instrument, such transmission of information would be likely to be caught by certain Swiss rules on the violation of business secrets and economic espionage.

* Article 15 - 'Request for investigations'- and Article 16- 'Presence of authorised staff of the authority of the requesting contracting Party'

These Articles are in line with the content of Article 12 of the Naples II Convention. The use of all investigation facilities allowed by the legal system of the requested Party as referred in Article 15 i includes questioning persons, searches of premises and means of transport, copies of documents, requests for information and seizures of objects, documents and items of value.

Article 16 covers the possibility of authorised staff to be present during the execution of the request for assistance and to consult the documents, to propose questions and suggest measures of investigation in order to contribute to the efficiency of mutual assistance and, where appropriate, to have access to the same premises and documents and information as the staff of the requested authority (EU-Switzerland summit conclusions of 19 May 2004).

* Article 17 - 'Duty to cooperate'

This Article is a corollary of Articles 15 and 16 of the Agreement and reflects similar obligations on traders in the Member States in respect of investigations conducted by their authorities.

* Article 18 - 'Form and content of the request for assistance'

This Article is in line with the content of Article 9 of the Naples II Convention.

* Article 19 - 'Use of information'

This Article is similar to Article 11 of the Protocol on mutual assistance in customs matters signed with Switzerland (OJ L 169, 27.6.97, p. 81) and it reflects a speciality rule. The use of information will remain confined to the protection of the Parties' financial interests as defined in Article 2 (EU-Switzerland summit conclusions of 19 May 2004).

* Article 20 - 'Spontaneous assistance'

This provision is broader than similar provisions contained in the Naples II Convention.

* Article 21 to Article 23 - 'Special forms of cooperation'

These Articles are in line with the content of some of the measures covered in Title IV of the Naples II Convention. They are drafted in such a way as to leave their application to the discretion of the Parties' authorities.

* Article 24 - 'Recovery'

This Article takes over the essence of Articles 6, 7, 9, 10, and 13 of Directive 76/308/EEC of 15 March 1976 on mutual assistance for the recovery of claims relating to certain levies, duties, taxes and other measures, OJ 19.3.76 L73, p. 18.

3.

Title III: Provisions relating to mutual legal assistance in criminal matters for the protection of financial interests


* Article 25 - 'Relationships with other Agreements'

This Article is based on the same rationale of the complementarity of international instruments as Article 48 of the SIC and Article 1 of the Convention on Mutual Assistance in Criminal Matters between the Members of the European Union of 29 May 2000, OJ C 197, 12.7.2000, p. 1.

The concept of multilateral Agreements between the Contracting Parties under the terms of Article 25, paragraph 2 of the Agreement, includes in particular, once it has entered into force, the Agreement between the European Union, the European Community and the Swiss Confederation on the involvement of the Swiss Confederation in the implementation, application and development of the Schengen acquis.

* Article 26 - 'Procedures in which assistance is given'

This Article is in line with the content of Article 49 of the SIC and Article 3 of the Convention of 29 May 2000 on Mutual Assistance in Criminal Matters between the Member States of the European Union.

This Article is now focused on the proceedings where judicial assistance is afforded (including as regards those facts or offences for which a legal person could be liable). Paragraph 2 has been maintained with the aim of extending the measures laid down in the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime (Strasbourg 8.11.1990) to offences covered by the anti-fraud Agreement.

* Article 27 - 'Transmission of requests'

This Article takes a flexible approach to transmission allowing both centralised transmission of requests and direct transmission to the executing authority. It is especially suited to the Swiss case, where the existence of two levels of jurisdiction (federal and cantonal) means that the possibility of centralised transmission may prove useful in certain situations.

The direct transmission of requests is in line with Article 6 of the Convention of 29 May 2000 on Mutual Assistance in Criminal Matters between the Member States of the European Union and will avoid unnecessary delays. Article 27 i provides for the necessary measures to identify the competent central authorities.

* Article 28 - 'Service by post'

This Article is in line with the content of Article 52 of the SIC and Article 5 of the Convention of 29 May of 2000 on Mutual Assistance in Criminal Matters between the Member States of the European Union.

* Article 29 - 'Provisional measures'

This Article corresponds to Article 24 of the Second Additional Protocol of 8 November 2001 to the European Convention on Mutual Assistance in Criminal Matters of the Council of Europe (Strasbourg 20.4.1959). Paragraph 2 corresponds to Article 11 of the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime (Strasbourg 8.11.1990).

* Article 30 - 'Presence of the authorities of the requesting Contracting Party'

This Article is in line with Article 4 of the European Convention on Mutual Assistance in Criminal Matters of the Council of Europe (Strasbourg 20.4.1959) and Article 2 of the Second Additional Protocol to the European Convention on Mutual Assistance in Criminal Matters (Strasbourg 8.11.2001). It is also inspired on Article 12 i of the Naples II Convention. The aim of this Article is to facilitate the execution of the requests of judicial assistance in order to avoid supplementary requests that would delay the effectiveness of cooperation.

As it was said for the administrative assistance (Article 16) this covers the possibility for the authorities and authorised staff of the requesting Contracting Party to be present during the execution of the request for assistance and to consult the documents, to propose questions and suggest measures of investigation in order to contribute to the efficiency of mutual assistance and, where appropriate, to have access to the same premises and documents and information as the staff of the requested authority (EU-Switzerland summit conclusions of 19 May 2004).

This provision does not however oblige the requested authorities to address an invitation to the requesting authorities to assist the execution of the measures requested by letter rogatory.

* Article 31 - 'Search and seizures'

Judicial cooperation, including search and seizures, will be granted, including in matters of indirect taxation and smuggling (EU-Switzerland summit conclusions of 19 May 2004).

Article 31(1)a reproduces the wording of Article 51(a) of the SIC.

Article 31 i corresponds to the Community anti-laundering standards under Directive 91/308/EEC on prevention of the use of the financial system for the purpose of money laundering as amended by Directive 2001/97/EC (OJ L 344, 28.12.01, p. 76)and under the Second Protocol to the Convention on the protection of the European Communities' financial interests (OJ C 222, 19.7.97, p. 12). Letters rogatory for search and seizure in respect of money laundering offences have to be executed provided that the predicate offence is punishable by custody of more than six months according to the law of the requesting and the requested Party. This means that tax fraud and professional smuggling will be covered (EU-Switzerland summit conclusions of 19 May 2004).

* Article 32 - 'Request for banking and financial information'

Requests for information on bank accounts, on banking transactions and requests for the monitoring of banking transactions will be treated in compliance with the standards laid down in the Protocol of 16 October 2001 to the Convention on Mutual Assistance in Criminal Matters between the Member States of the European Union, OJ C 326, 21.11.2001, p. 1, including, if necessary, the non-disclosure to the person concerned of investigative measures (see Articles 1 to 4 of the Protocol) (EU-Switzerland summit conclusions on 19 May 2004).

* Article 33 - 'Controlled deliveries'.

This Article is modelled on Article 12 of the Convention of 29 May 2000 on Mutual Assistance in Criminal Matters between the Member States of the European Union.

* Article 34 - 'Handing over for confiscation or return'

This Article is in line with Article 8 of the Convention on Mutual Assistance in Criminal Matters between the Member States of the European Union of 29 May 2000.

* Article 35 - 'Speeding up mutual assistance'

This Article reflects the negotiating directives adopted by the Council on 14 December 2000 as regards avoiding excessively long cooperation procedures. The text is in full compliance with Article 4 i, i and i of the Convention of 29 May 2000 on Mutual Assistance in Criminal Matters between the Member States of the European Union.

By execution of the request for judicial assistance under the terms of Article 35, paragraph I, it is also understood to cover the transmission of information and evidence to the authority of the requesting Contracting Party.

* Article 36 - 'Use of evidence'

This Article is to be interpreted in full respect of the data protection rules contained in the acquis communautaire and, in particular, in accordance with Article 23 of the Convention of 29 May 2000 on Mutual Assistance in Criminal Matters between the Members of the European Union.

* Article 37 - 'Spontaneous transmission of evidence'

This Article is based on Article 7 of the Convention of 29 May 2000 on Mutual Assistance in Criminal Matters between the Member States of the European Union. The additional reference in the Agreement to spontaneous transmission of evidence does not presuppose any substantive change compared with existing rules since the evidential value will of course be determined by criminal procedural law in the country of prosecution.

* Article 38 - 'Procedures in the requested Party'

This Article is justified by Swiss case law, according to which a foreign country joining a civil action to criminal proceedings in Switzerland may be refused access to the file as civil party if in addition to these proceedings the Swiss authorities are handling a request for mutual assistance from a judicial authority in that country in respect of the same case (Abacha, judgment of the Public Law Court of 5 June 2001). The provision is designed to ensure that the Community or the Member States could enjoy their full rights as a party in proceedings should they join a civil claim to criminal proceedings in Switzerland.

4.

Title IV: Final provisions


* Article 39 - 'Joint Committee'

This Article sets up a joint committee for managing the Agreement, settling disputes (Article 40) and making recommendations on revising the Agreement (Article 42).

* Article 40 - 'Dispute settlement'

* Article 41 - 'Reciprocity'

This Article sets out that no unilateral measures will be taken without prior consultation of the Joint Committee.

* Article 42 -"Revision"

* Article 43 -"Territorial scope"

This Article is in line with the standard provisions on the matter. However, the Commission will send to the Swiss an indicative list of territories in which the Agreement applies.

* Article 44 - 'Entry into force'

Where a declaration is to be made under Article 44 i it is clear that it could only be the Community which could make a declaration on matters of Community competence and that any declaration could not concern relations between the Member States but only the relations with Switzerland.

* Article 45 -"Withdrawal"

This Article contains the possibilities of denouncing the Agreement.

* Article 46 -"Application over time"

This Article contains a clause for the application the Agreement to requests concerning illegal activities committed six months after the signature of the Agreement.

* Article 47 - 'Extension of the Agreement to the new Members of the EU'

This Article is designed to make it easier to extend the Agreement to the new Member States.

* Article 48 - 'Authentic texts'.