Explanatory Memorandum to COM(2016)819 - Mutual recognition of freezing and confiscation orders

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dossier COM(2016)819 - Mutual recognition of freezing and confiscation orders.
source COM(2016)819 EN
date 21-12-2016


1. CONTEXT OF THE PROPOSAL

• Reasons for and objectives of the proposal

One of the main motives for criminal activity is financial gain. Taking away the profit of criminal activity and making sure that 'crime does not pay' is therefore a very effective mechanism to combat crime. The confiscation of assets generated by criminal activities aims at preventing and combatting crime, including organised crime, compensating victims, and provides additional funds to invest back into law enforcement activities or other crime prevention initiatives and to compensate victims. Freezing and confiscation of assets is also an important tool to combat terrorist financing. The terrorist attacks in 2015 and 2016 in the European Union and beyond underlined the urgent need to prevent and fight terrorism. The challenge to disrupt terrorist financing and its close link with organised crime networks requires determined, rapid and cohesive action to modernise relevant legislation, ensure its implementation and better cooperation between Member States and beyond.

The European Agenda on Security of 28 April 2015 1 highlighted the need for measures to address terrorist financing in a more effective and comprehensive manner. One of the priorities identified was the disruption of organised criminal networks and the ways they are financed. In this context the European Agenda on Security also attached strategic importance to the need for improving the mutual recognition of freezing and confiscation orders.

Recent research 2 estimates that illicit markets in the European Union generate about 110 billion EUR, i.e. approximately 1% of the EU's GDP in 2010. However, and although existing statistics are limited, the amount of money currently being recovered from proceeds of crime within the EU is only a small proportion: 98.9% of estimated criminal profits are not confiscated and remain at the disposal of criminals. A functioning asset recovery regime is a precondition if more criminal assets are to be seized. This includes an efficient mutual recognition framework for freezing and confiscation orders. Although legislation on mutual recognition of freezing and confiscation orders does exist at EU level, it is patchy, out of date, and leaves lacunae which can be exploited by criminals. The importance of confiscation of criminal assets has been recognised by the European Union. After the adoption in 1999 of the Tampere European Council conclusions, four legislative instruments on freezing and confiscation, including two mutual recognition instruments, were adopted between 2001 and 2006, which are all (at least in parts) still in force today. 3

In parallel, efforts were made to strengthen the identification and tracing of the proceeds and instrumentalities of crime. Council Decision 2007/845/JHA 4 provides for the establishment of Asset Recovery Offices in all Member States.

After the entry into force of the Lisbon Treaty, confiscation has been given strategic priority at EU level as an effective instrument to fight organised crime. Directive 2014/42/EU establishes common minimum rules for the freezing and confiscation of instrumentalities and proceeds of crime in the European Union.

When adopting Directive 2014/42/EU, the European Parliament and the Council, in a joint statement, called on the Commission "to present a legislative proposal on mutual recognition of freezing and confiscation orders at the earliest possible opportunity (…) considering the need of putting in place a comprehensive system for freezing and confiscation of proceeds and instrumentalities of crime in the EU" 5 . This call has been repeated on various occasions in bilateral contacts and expert meetings.

In this joint statement the European Parliament and the Council also called on the Commission to analyse the feasibility, opportunity and possible benefits of introducing common rules on non-conviction based confiscation taking into account the differences between the legal traditions and the systems of the Member States. In view of delivering this analysis the Commission has organised expert meetings in September and November 2016. It envisages to issue the feasibility analysis in 2017.

In its Communication of 2 February 2016 to the European Parliament and the Council on an 'Action Plan for strengthening the fight against terrorist financing' 6 , the Commission highlighted the need to ensure that criminals who fund terrorism are deprived of their assets. The Commission committed to strengthening the mutual recognition of criminal assets' freezing and confiscation orders by the end of 2016. It was underlined that the 'mutual recognition of judgments and judicial decisions is a key element in the security framework'.

In October 2016, the European Parliament, in the context of a report presented by MEP Laura Ferrara on the fight against corruption, has called again on the Commission to submit a proposal on the strengthening of mutual recognition of freezing and confiscation orders 7 .

The current initiative is a response to identified deficiencies of the existing mutual recognition instruments 8 and to these calls. It builds on existing EU legislation on mutual recognition of freezing and confiscation orders and addresses the fact that Member States have developed new forms of freezing and confiscation of criminal assets. It also takes into account developments at EU level, including the minimum standards for freezing and confiscation orders set out in Directive 2014/42/EU. Whereas the Directive improves the domestic possibilities to freeze and confiscate assets, the proposal aims to improve the cross-border enforcement of freezing and confiscation orders. Together, both instruments should contribute to effective asset recovery in the European Union.

• Consistency with existing EU legal framework in the policy area

The current EU legal framework consists of five main instruments. Apart from Council Decision 2007/845/JHA on asset tracing, two of them are mutual recognition instruments and two harmonisation measures. Both types of instruments are necessary in order to have a functioning regime of recovery of criminal assets and they complement each other.

Mutual recognition instruments:

Council Framework Decision 2003/577/JHA of 22 July 2003 on the execution in the European Union of orders freezing property or evidence 9 and Council Framework Decision 2006/783/JHA of 6 October 2006 on the application of the principle of mutual recognition to confiscation orders 10 are aimed at facilitating the recovery of assets in cross-border cases.

Both Framework Decisions are based on the principle of mutual recognition and work in a similar way. Both instruments require freezing or confiscation orders issued in one Member State to be recognised and executed in another Member State. The orders are transmitted alongside a certificate to the competent authorities in the executing State which must recognise them without further formalities and take the measures necessary for their execution.

Mutual recognition cannot be refused because of lack of dual criminality for a list of offences punishable by at least three years of imprisonment in the issuing State. In other cases, recognition can be refused if the crime to which the freezing or confiscation order relates is not a criminal offence under the laws of the executing State. The Framework Decisions allow for other grounds for refusal in certain situations. These two Framework Decisions will be replaced by one single instrument - the proposed Regulation.

Harmonisation measures:

Council Framework Decision 2005/212/JHA of 24 February 2005 on confiscation of crime-related proceeds, instrumentalities and property 11 requires all Member States to put in place effective measures to enable the ordinary confiscation of criminal instrumentalities and proceeds for all criminal offences punishable by detention of at least one year. It also introduced provisions on extended confiscation. However, the level of harmonisation introduced by this instrument was very low, and it has not removed the diversity of national legal confiscation regimes.

Directive 2014/42/EU of 3 April 2014 on the freezing and confiscation of instrumentalities and proceeds of crime in the EU 12 had to be implemented by Member States by October 2016. It replaces certain provisions of Council Framework Decision 2005/212/JHA. Whereas the Framework Decision 2005/212/JHA continues to apply to all criminal offences punishable by detention of at least one year, regarding ordinary confiscation, the Directive could only cover the so-called Eurocrimes 13 .

Directive 2014/42/EU sets minimum rules for national freezing and confiscation regimes: it requires ordinary and value confiscation for Eurocrimes, including where the conviction results from proceedings in absentia. It provides rules for extended confiscation subject to certain conditions. It also enables confiscation where a conviction is not possible because the suspect or accused person is ill or has absconded. The Directive also enables for the first time the confiscation of assets in the possession of third parties. Finally, the Directive introduces a number of procedural safeguards 14 , such as the right to be informed of the execution of the freezing order including, at least briefly, on the reason or reasons; the effective possibility to challenge the freezing order before a court; the right of access to a lawyer throughout the confiscation proceedings; the effective possibility to claim title of ownership or other property rights; the right to be informed of the reasons for a confiscation order and to challenge it before a court.

Contents

1.

Summary of the proposed Regulation


A Europe-wide concept of justice is founded on increased legal co-operation in both civil and criminal matters, via the principle of 'mutual recognition' when each legal system gradually acknowledged that the decisions adopted by the legal systems of other Member States are valid and should be recognised without further formalities.

A mutual recognition mechanism should allow a Member State to recognise and enforce the freezing or confiscation order issued by another Member State without any intermediate formalities. The proposed Regulation will cover mutual recognition of all types of freezing and confiscation orders issued in the framework of criminal proceedings, including extended confiscation, third-party confiscation and non-conviction based confiscation orders. 15

This proposal for a Regulation improves the current mutual recognition legal framework in several ways:

• Directly applicable legal instrument:

The proposed Regulation, once adopted, will be directly applicable in the Member States. This will bring clarity and eliminate problems with transposition into national systems. The experience has shown that not all the Member States have transposed the Framework Decisions on mutual recognition of freezing and confiscation orders until now.

• Extended scope compared to the current mutual recognition instruments:

In addition to the types of confiscation already covered by the existing Framework Decisions (ordinary confiscation and extended confiscation, the latter with wide discretion to refuse recognition), the proposed Regulation will cover third-party confiscation and criminal non-conviction based confiscation and no longer provide for wide discretion to refuse recognition in case of extended confiscation.

• Extended scope compared to Directive 2014/42/EU:

The proposed Regulation will cover mutual recognition of all types of freezing and confiscation orders covered by the Directive. In addition, it will also cover orders for non-conviction based confiscation issued within the framework of criminal proceedings: the cases of death of a person, immunity, prescription, cases where the perpetrator of an offence cannot be identified, or other cases where a criminal court can confiscate an asset without conviction when the court has decided that such asset is the proceeds of crime. This requires the court to establish that an advantage was derived from a criminal offence. In order to be included in the scope of the Regulation, these types of confiscation orders must be issued within the framework of criminal proceedings, and therefore all safeguards applicable to such proceedings will have to be fulfilled in the issuing State 16 .

• Clear deadlines for freezing and confiscation orders:

While freezing as a precautionary measure needs to take place urgently and requires short deadlines for recognition and execution, the recognition and execution of confiscation orders can take place within a longer time period. Nevertheless, deadlines also need to be established for confiscation orders to ensure efficient cross-border procedures.

• One single instrument for mutual recognition of both freezing and confiscation orders containing directly applicable rules and deadlines will ensure that the orders are recognised and executed without delay within the Union.

• A standard certificate and a standard form:

The speedy and efficient mechanism will also be ensured thanks to a standardised certificate for mutual recognition of confiscation orders and a standard form for freezing orders which are annexed to the proposal. They contain all the relevant information on the order, which will help the executing authority to reach precisely the property targeted and will facilitate the recognition and enforcement of the foreign measure by the competent national authorities. The standard form for freezing orders will simplify the mutual recognition procedure of freezing orders to the maximum extent as it will not be accompanied by another domestic freezing order. The procedure for recognition and execution of freezing and confiscation orders are regulated separately in the proposal to simplify direct application by competent national authorities.

• Communication between the competent authorities:

Communication between the competent authorities to allow smooth and swift recognition and execution of freezing and confiscation orders has been emphasised throughout the proposal.

• Victims’ rights:

The victim’s right to compensation and restitution has been duly taken into account in the Proposal. It is ensured that in cases where the issuing State confiscates property, the victim’s right to compensation and restitution has priority over the executing and issuing States’ interest.

2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

• Legal basis

The legal basis to support action in the field of mutual recognition of criminal assets' freezing and confiscation orders is Article 82 i of the Treaty on the Functioning of the European Union, which specifies notably that judicial co-operation in criminal matters in the Union shall be based on the principle of mutual recognition of judgments and judicial decisions.

Measures may be adopted in accordance with the ordinary legislative procedure to lay down rules and procedures for ensuring recognition throughout the Union of all forms of judgments and judicial decisions, and to facilitate cooperation between judicial or equivalent authorities of the Member States in relation to proceedings in criminal matters and the enforcement of decisions.

• Choice of the instrument

Article 82 i TFEU gives the EU legislator the possibility to adopt regulations and directives.

As the proposal concerns cross-border procedures, where uniform rules are required, there is no need to leave a margin to Member States to transpose such rules. A regulation is directly applicable, provides clarity and greater legal certainty, and avoids the transposition problems that the Framework Decisions on mutual recognition of freezing and confiscation orders were subject to. For these reasons the most appropriate form to be used for this mutual recognition instrument is considered to be a regulation.

• Subsidiarity and proportionality

Under Article 5(3) TEU, the Union shall only act if the proposed action cannot be sufficiently achieved by the Member States. Article 67 TFEU provides that the Union shall provide citizens with a high level of security by preventing and combating crime. The assets of criminals are frequently invested in several countries. This cross-border dimension justifies European action.

While cross-border criminal and asset investigations may occur in several countries, prosecution and the judicial activities leading to confiscation normally take place in only one Member State and thus confiscation procedures remain essentially national. However, their cross-border dimension is evident in the enforcement of orders in other Member States. Thus, asset recovery requires effective cooperation among Member States. The most effective way of ensuring cross-border co-operation is on the basis of mutual recognition. Mutual recognition is in accordance with the principle of subsidiarity since it aims at recognising each other's decisions, and cannot be achieved by Member States acting alone.

The proposal does not cover all existing forms of confiscation orders (such as civil and administrative orders) and is limited to confiscation orders issued in criminal proceedings. It does not go beyond the minimum required in order to achieve the stated objective at European level and what is necessary for that purpose.

3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

• Ex-post evaluations/fitness checks of existing legislation

The implementation reports on Framework Decision 2003/577/JHA 17 and Framework Decision 2006/783/JHA 18 were adopted in 2008 and 2010. These Reports concluded at the time of their publication that the level of transposition of these Framework Decisions into the national legal systems of Member States was not satisfactory. The 2012 Impact Assessment accompanying the Commission proposal for Directive 2014/42/EU 19 concluded on the need for a legal instrument to improve mutual recognition in this area, namely that there is a fundamental problem with the scope of the existing measures and that a new mutual recognition instrument was justified.

A comparative law study on the implementation of mutual recognition of freezing and confiscation orders in the EU 20 was carried out in 2013 and concluded that one coherent instrument for mutual recognition could be envisaged. In addition, several expert meetings and conferences dedicated to the issue of mutual recognition of freezing and confiscation orders and in particular to non-conviction based confiscation were organised in the past years.

In view of the existing data, a separate ex post evaluation of the existing mutual recognition instruments was not carried out.

• Stakeholder consultations

All the relevant stakeholders were consulted. As this subject is dealt with by a rather limited number of experts targeted consultation was carried out instead of a public consultation which would have had very limited added value because of the complexity of the topic. Expert meetings and conferences were organised to discuss this subject.

Overall, there is large consensus on the need to improve mutual recognition of freezing and confiscation orders with a new legislative instrument. It has been repeatedly pointed out that confiscation is a very efficient tool in the fight against organised crime and terrorism and it has been acknowledged that there is an increased need for more effective cross-border cooperation within the EU and at an international level.

Experts repeatedly complained about the underuse of confiscation in cross-border situations. They underlined that the current system does not work and that the Framework Decisions on mutual recognition are not used. As an example it was mentioned that the proceeds from drug trafficking, invested by drug dealers in several Member States, could not be confiscated because of the lack of cross-border cooperation at judicial level.

Member States also acknowledge the need to improve mutual recognition of freezing and confiscation orders with a new legislative instrument.

• Impact assessment

The impact assessment supporting this proposal has been carried out 21 and a positive opinion with reservations has been issued by the Regulatory Scrutiny Board 22 . Following this opinion the impact assessment was amended to better explain the political context of this initiative and the political imperative to act now. More systematic references to relevant policy strategies were introduced. The structure of the problem section was revised in order to clarify the importance of the different problems and to illustrate better that the shortcomings of the current legal framework are mostly due to its limitations. The interplay of the issue of victims' restitution and compensation with other problems was clarified. The baseline scenario was further elaborated and reflects more realistically current trends in the use of confiscation and freezing orders. The report clarifies how the various options differ from each other (e.g. scope) or overlap/include each other (e.g. streamlining of procedures and simplification of certificates). Discarded options were added. Furthermore, the report has been amended to specify better the impacts of the various options. The discussions and conclusions of the expert meeting of 17 November 2016 were integrated into the report and stakeholder views in general were presented more systematically throughout the report. Finally, a preferred option was added based on the comparative assessment of the options, their impacts, the conclusions of the expert meeting of 17 November 2016 and the political feasibility of the various options 23 .

Four main policy options were considered: retention of the status quo (Option 1), a soft law option (Option 2) and two regulatory policy options (Options 3 and 4). The retention of the status quo would involve taking no action at EU level, while the other three alternative policy options would improve, to a different extent, the ability to seize and confiscate proceeds of crime on a cross-border basis. Option 2 (non-legislative action/soft-law) would support mutual recognition of freezing and confiscation orders by, for example, training and the dissemination of best practice, and the promotion of the use of international instruments to promote cross-border seizure and confiscation. However, its expected impact would be rather low and it would still be excluded for some EU Member States to act on certain requests from other Member States. Options 3 and 4 (minimal and maximal legislative action) would entail obligations to recognise and execute a range of orders to freeze and confiscate criminal assets. Option 3 would require the recognition of only those freezing and confiscation orders which are set out in Directive 2014/42/EU. Option 4 provides for two sub-options: Option 4a would cover all types of freezing and confiscation orders issued in the context of criminal proceedings including also criminal non-conviction based confiscation. Option 4b would require the recognition of all confiscation orders including those issued in civil and administrative proceedings where it is shown that the property is the proceeds of criminal conduct.

Member States support a policy option which entails new legislation (Options 3, 4a or 4b). There is, however, variation among the Member States' positions as to what kind of measures the instrument should cover. Option 3 would not raise particular concerns from Member States but would not be considered sufficient by those Member States which have more extensive forms of confiscation.

The European Parliament is in favour of a legislative proposal to strengthen the mutual recognition of freezing and confiscation orders.

The preferred option of the Commission is a mutual recognition instrument with an extended scope and improved provisions that ensure a wider circulation of freezing and confiscation orders issued within the framework of criminal proceedings in the European Union (Option 4a). This option tackles most of the identified problems and is also legally sound. It also appears to be more easily accepted by Member States than an instrument including administrative and civil confiscation. It also satisfies the proportionality principle as it is limited in its scope and does not go beyond the minimum necessary to achieve the objectives established at European level.

The economic and social impact of the preferred option is expected to be overall positive. The requirement to recognise a greater range of freezing and confiscation orders should increase the amount of criminal assets frozen and seized across Member State borders. It should, therefore, ultimately lead to reduced profits for organised criminals and would deny criminals the possibility to reinvest their profits to fund further criminality. Increasing the likelihood of confiscation also increases the deterrent effect on crime. It should also lead to a reduction in losses to Member State revenue. The social impact would be overall very positive as confiscated criminal assets can be given back to the victims from whom they are stolen, or reused for public or social purposes.

The requirement to recognise and execute a greater range of freezing and confiscation orders will lead to a limited increase in the costs for law enforcement and judicial authorities. However, this should be more than offset by the increased ability to recover – and reuse where appropriate – the proceeds of crime.

Businesses, SME's and micro-enterprises will not be directly affected by this proposal. However, seizing of criminal assets makes it more difficult for criminal business to operate, thus in the long term it should help legitimate business by decreasing competition by illegal actors.

• Fundamental rights

Freezing and confiscation measures may interfere with fundamental rights protected by the EU Charter of Fundamental Rights (the Charter) and the European Convention on Human Rights (ECHR).

In particular in relation to non-conviction based confiscation the European Court of Human Rights has repeatedly considered non-conviction based confiscation, including civil and administrative forms, and extended confiscation to be consistent with Article 6 ECHR and Article 1 of Protocol 1, if effective procedural safeguards are respected.

Shifts of the burden of proof concerning the legitimacy of assets have not been found in violation of fundamental rights by the ECtHR, as long as they were applied in the particular case with adequate safeguards in place to allow the affected person to challenge these rebuttable presumptions.

Some important safeguards are included in the proposed Regulation: the principle of proportionality needs to be respected, there are grounds for refusal based on the non-respect of the principle of ‘ne bis in idem’ and the rules on ‘in absentia’ proceedings. Moreover, the rights of bona fide third parties have to be respected, there is an obligation to inform interested parties of the execution of a freezing order including of the reasons thereof and the legal remedies available, and there is an obligation for Member States to provide for legal remedies in the executing State.

Furthermore, Article 8 of Directive 2014/42/EU includes a list of safeguards that need to be ensured by the Member States for those orders falling within the scope of the Directive.

Finally, all criminal law procedural safeguards are applicable. This includes in particular the right to a fair trial enshrined in Article 6 ECHR and Articles 47 and 48 of the Charter. It also includes the relevant legislation at EU level on procedural rights in criminal proceedings: Directive 2010/64/EU on the right to interpretation and translation in criminal proceedings, Directive 2012/13/EU on the right to information about rights and charges and access to the case file, Directive 2013/48/EU on the right of access to a lawyer and communication with relatives when arrested and detained, Directive 2016/343 on the strengthening of certain aspects of the presumption of innocence and the right to be present at one's trial, Directive 2016/800 on the procedural safeguards for children and Directive 2016/1919 on legal aid for suspects and accused persons in criminal proceedings and for requested persons in European arrest warrant proceedings.

If applied with proportionality and complemented with effective procedural safeguards as described above, the measures in this proposal are compatible with fundamental rights requirements.

4. BUDGETARY IMPLICATIONS

The legislative proposal for a Regulation does not have an impact on the EU Budget. One of the general objectives is to deprive criminals from their ill-gotten profits. It is designed to ensure compensation for victims and increase national treasury and EU incomes. It is also designed to reduce the collective cost of fraud and other social expenses. Finally, this proposal should have positive consequences for national and European economies.

5. OTHER ELEMENTS

• Implementation plans and monitoring, evaluation and reporting arrangements

The Regulation is directly applicable within the EU. It will be directly applied by practitioners, with the result that orders issued by other Member States will have to be executed like domestic ones, without the need to modify their internal legal system and their way of working.

The Regulation will be reviewed and the Commission will submit a report five years after the entry into application.

• Detailed explanation of the specific provisions of the proposal

2.

Chapter I: Subject-matter, definitions and scope


Article 1: Subject-matter

This proposal for a Regulation lays down rules under which a Member State recognises and executes freezing and confiscation orders issued within the framework of criminal proceedings. This Regulation covers all confiscation orders imposed by a court following proceedings in relation to a criminal offence and all freezing orders issued with a view to possible subsequent confiscation. It thus applies to all types of orders covered by Directive 2014/42/EU, as well as other types of orders issued without final conviction within the framework of criminal proceedings. This Regulation does not apply to freezing and confiscation orders issued within the framework of civil or administrative procedings.

This Regulation covers all criminal offences. It is not limited to the areas of particularly serious crime with a cross-border dimension so-called ‘Eurocrimes’ (unlike Directive 2014/42/EU which is based on 83 TFEU) as Article 82 TFEU (on which this proposal is based on) does not require such a limitation for mutual recognition of judgments in criminal matters. Therefore, the proposal covers mutual recognition of freezing and confiscation orders related to offences covered by Directive 2014/42/EU, as well as orders related to other offences which are not covered by that Directive.

3.

Article 2: Definitions


Article 2 provides for the definition of several concepts used in the proposal.

The proposal lays down definition of confiscation order, freezing order, property, proceeds, instrumentalities, issuing State, executing State, issuing authority, and executing authority.

Confiscation order is a final penalty or measure imposed by a court following proceedings in relation to a criminal offence, resulting in the final deprivation of property. A freezing order is any judicial decision or decision validated by a judicial authority to provisionally prevent the destruction, transformation, moving, transfer or disposal of property with a view to possible subsequent confiscation.

The definition of issuing authority differs for freezing and confiscation orders. To take into account various national systems, the same approach is taken as in Directive 2014/41/EU with respect to the definition of issuing authority for freezing orders. In cases where the competent issuing authority is not a judge, a court, an investigating judge or a public prosecutor, the freezing order must be validated by a judge, court, investigating judge or a public prosecutor before its transmission.

The definition of issuing and executing authority must be read together with Article 27 whereby Member States are required to notify to the Commission the competent issuing and executing authorities.

4.

Article 3: Offences


A list of offences for which the mutual recognition and execution of freezing and confiscation orders cannot be refused based on dual criminality is the same as the list contained in other mutual recognition instruments with one exception only: point (y) of the list now reflects the existence of common minumum standards for combating fraud and counterfeiting of non-cash means of payment (Framework Decision 2001/413/JHA).

Dual criminality cannot be invoked for a list of offences punishable by at least three years of imprisonment in the issuing State. In cases of offences not included in this list, recognition can be refused if the crime to which the freezing or confiscation order relates is not a criminal offence under the laws of the executing State.

5.

Chapter II - Transmission, recognition and execution of confiscation orders


Article 4 - 7: Transmission of confiscation orders

These articles set out a mechanism for transmission of confiscation orders. The proposal provides for a direct transmission of a confiscation order between competent national authorities but also allows for the possibility of assistance by central authorities. The rules on identification of the competent executing authority and on the possibility to transmit the confiscation order to more than one Member State are clarified.

In principle, a confiscation order may only be transmitted to one executing State at a time. However, some exceptions are laid down in Article 5. Where properties covered by the order are located in different executing States or the execution involves action in more than one executing State, the issuing authority may transmit the order to more than one executing State. The issuing authority may also transmit the order concerning an amount of money to several executing States where the property concerned has not been frozen or where the value of the property that may be recovered in the issuing State and any one executing State is not likely to be sufficient for the execution of the full amount covered by the order.

The transmission of the confiscation order by the issuing State does not limit that State's competence to execute the order itself. Rules are also set to ensure that the execution of the order will not exceed the maximum amount specified in the order.

The confiscation order must be accompanied by a standard certificate annexed to this proposal. The certificate must be translated into an official language of the executing State.

6.

Article 8: Recognition and execution of confiscation orders


The executing authority must recognise the confiscation order without further formalities and must take the necessary measures for its execution in the same way as for a confiscation order made by an authority of the executing State unless it invokes one of the grounds for refusal or postponement. Detailed rules for a possibility to confiscate different type of property than the one specified in the confiscation order are laid down.

7.

Article 9: Grounds for non-recognition and non-execution of confiscation orders


An exhaustive list of grounds for non-recognition and non-execution of confiscation orders on which basis the executing authority may refuse the recognition and execution of the confiscation order is laid down in Article 9. The list differs significantly from the list contained in the 2006 Framework Decision. Some grounds for refusal remain the same, e.g. the ground based on the principle ‘ne bis in idem’ or the ground based on immunity or privilege. However, the grounds for refusal linked to the type of the confiscation order (e.g. extended confiscation) have not been included in the proposal thus considerably broadening and strengthening the mutual recognition framework.

Regarding the ground for refusal based on the right to be present at the trial, it only applies to trials resulting in confiscation orders linked to a final conviction, and not to proceedings resulting in non-conviction based confiscation orders.

8.

Article 10: Time limits for recognition and execution of confiscation orders


This Article establishes time limits for the recognition and execution of confiscation orders thus bringing added value compared to the 2006 Framework Decision which did not contain any time limits. Compared to freezing which must be carried out within a very short timeframe, confiscation can take place within a longer time period. Nevertheless, the experience with the 2006 Framework Decision has shown that establishing clear deadlines is needed to ensure efficient cross-border procedures.

Different time limits are set separately for the decision on the recognition and for the execution of the confiscation order. Firstly, the executing authority must take the decision on the recognition and execution of the confiscation order as soon as possible and not later than 30 days after the receipt of the confiscation order. Secondly, the executing authority must carry out the confiscation without delay and not later than 30 days after taking the decision to recognise and execute the confiscation order.

In specific cases where it is not possible for the executing authority to meet the time limits, it must inform the issuing authority without delay.

9.

Article 11: Postponement of execution of confiscation orders


This Article provides a standard wording in mutual recognition instruments allowing for the possibility to postpone the recognition or execution of the confiscation order. The executing authority may postpone the execution of the confiscation order if there is a risk of damaging an ongoing criminal investigation or a risk that the total amount exceeds the amount specified in the order or in cases where legal remedies have been invoked in accordance with Article 33.

10.

Article 12: Impossibility to execute a confiscation order


A situation may occur where it is impossible for the executing authority to execute the confiscation order. In such cases the executing authority must notify the issuing authority without delay. Where possible, the order may be executed on other property.

11.

Chapter III - Transmission, recognition and execution of freezing orders


Article 13 - Conditions for issuing and transmitting a freezing order

This Article lays down conditions for issuing and transmitting a freezing order to ensure the proportionality principle is respected. This Article aligns the proposal with Article 6 of Directive 2014/41/EU, thereby ensuring that the same conditions apply to freezing for evidence and freezing for subsequent confiscation. The executing authority must execute the order within the time limits set in Article 19, but if it has reason to believe that these conditions have not been met, it can consult the issuing authority once the order has been recognised and executed.

12.

Article 14: Transmission of freezing orders


A freezing order is to be directly transmitted between competent national authorities, but assistance by central authorities is also allowed. The rules on identification of the competent executing authority are clarified. The freezing order must be accompanied by a request for enforcement of a confiscation order, or it must contain an instruction that the property remains in the executing State pending a request for confiscation, and the estimated date of such a request must be provided. The issuing authority must also inform the executing authority of any interested party, including bona fide third parties, affected by the freezing order that it is aware of.

13.

Article 15: Transmission of a freezing order to one or more executing States


In principle, a freezing order can be transmitted to only one Member State at a time. This Article lays down rules on the possibility to transmit the freezing order to more than one Member State. These rules are very similar to the rules on transmission of confiscation orders.

Where properties covered by the order are located in different executing States or the execution involves action in more than one executing State, the issuing authority may transmit the order to more than one executing State. The issuing authority may also transmit the order concerning an amount of money to several executing States where the value of the property that may be frozen in the issuing State and any one executing State is not likely to be sufficient for the execution of the full amount covered by the order.

14.

Article 16: Form of the freezing order


The proposal provides for a simplified procedure as it provides for a standard form for issuing a freezing order. The form is therefore not a ‘certificate’ which accompanies a separate decision. This is a simplification of the mutual recognition procedure as the 2003 Framework Decision on mutual recognition of freezing orders required that a certificate was attached to the national freezing order. Instead, the proposal provides in its Annex B a standard form for freezing order that the issuing authority must complete, sign and certify its content as accurate and correct and translate it into an official language of the executing State. This approach is the same as the one adopted in Directive 2014/41/EU.

15.

Article 17: Recognition and execution of freezing orders


The executing authority must recognise a freezing order without further formalities and must take the necessary measures to execute it unless it invokes one of the grounds for refusal or postponement of its recognition and execution.

16.

Article 18: Grounds for non-recognition and non-execution of freezing orders


The grounds for refusal are similar to the grounds for refusal concerning confiscation orders, with some obvious non-applicable exceptions.

17.

Article 19: Time limits for recognition and execution of freezing orders


Freezing as a precautionary measure needs to take place urgently and requires short deadlines for recognition and execution. For this reason clear time limits are laid down by the proposed Regulation. This is a major improvement compared to the 2003 Framework Decision where no clear time limits were established.

Three different time limits are set separately for the decision on the recognition, for the execution of the freezing order and for the reporting back to the issuing authority. Short deadlines are set to ensure that the executing State will recognise and execute the order and communicate the outcome to the issuing authority speedily and with the same celerity and priority as for similar domestic cases. In addition, the executing authority must take full account of particular requirements specified in the freezing order such as the necessity of the immediate freezing or a specific date for freezing.

Firstly, the executing authority must take the decision on the recognition and execution of the freezing order as soon as possible and at the latest within 24 hours after the receipt of the freezing order.

Secondly, the executing authority must carry out the freezing without delay and not later than 24 hours after taking the decision to recognise and execute the freezing order and it must communicate its decision without delay to the issuing authority.

In cases where a ground for refusal or postponement is invoked by the executing authority these strict time limits cannot be maintained. Therefore for such cases, the proposal clarifies that the executing authority must act without delay.

In addition to these deadlines, Article 25 provides for a deadline of 3 days within which the executing authority must report to the issuing authority about the measures taken.

18.

Article 20: Postponement of execution of a freezing order


This Article provides a standard wording in mutual recognition instruments for a possibility to postpone the recognition or execution of the freezing order. The executing State may postpone the execution of a freezing order if there is a risk of damaging ongoing investigations or the property is already subject to a freezing order or the property is already subject to a freezing order issued in other criminal proceedings in the executing State. The executing authority must immediately report on the postponement of the freezing order to the issuing authority and as soon as the ground for postponement has ceased to exist, the executing authority must immediately execute the order and inform the issuing authority.

19.

Article 21: Obligation to inform the interested party


Following the execution of the freezing order, the executing authority must notify its decision to the person against whom the freezing order has been issued and to any interested party taking due account of the confidentiality rules laid down in Article 22. This will allow the persons affected to take legal remedies, without endangering the freezing.

20.

Article 22: Confidentiality


Most freezing orders contain information which has to be protected in order to safeguard the investigation. This Article is inspired by Article 19 of Directive 2014/41/EU on the European Investigation Order and it provides for the obligation of the issuing and the executing authorities to preserve the confidentiality of the investigation. The executing authority must inform the issuing authority without delay if it cannot comply with the confidentiality requirement.

21.

Article 23: Duration of the freezing orders


In principle, the property should be frozen until a final decision on confiscation or discharge of the frozen property is issued by the issuing State. However, cases might occur where the freezing seems to be no longer justified or the duration seems to be excessive. This Article lays down rules for limitation of the period for which the property will be frozen following consultation between the executing and the issuing authority. There is no absolute time limit, as the duration of investigations and trial may justify a long freezing period. If the issuing authority does not provide reasons for non-acceptance of the limitation proposed by the executing authority within 6 weeks, the executing authority may lift the freezing order.

22.

Article 24: Impossibility to execute the freezing order


The executing authority must notify the issuing authority without delay where it is impossible to execute the freezing order for the reason that the property has already been confiscated, has disappeared, has been destroyed, cannot be found in the location indicated or the location has not been sufficiently precise.

23.

Article 25: Reporting


This Article lays down a deadline of 3 days within which the executing authority must report on the measures taken and results of the execution of the freezing order.

24.

Chapter IV - General provisions


This Chapter provides general rules for mutual recognition of both freezing and confiscation orders.

25.

Article 26: Law governing execution


The executing State has competence to adopt and to enforce measures in that State following the recognition of a freezing or confiscation order. The law of the executing State applies to the enforcement of the decision, including rules on safeguards where decisions are adopted in the executing State relating to the freezing order or confiscation order.

A freezing order or a confiscation order issued against a legal person must be executed even if the executing State does not recognise the criminal liability of legal persons.

Unless the issuing State agreed, the executing State may not impose alternative measures to freezing and confiscation except for those provided for in Article 8 of the proposal.

26.

Article 27: Notification on the competent authorities


Member States are required to notify to the Commission the competent issuing and executing authorities according to the definition of Article 2(8) and (9). In addition, Member States may designate one or more central authorities responsible for the administrative transmission and reception. The Commission will make sure that this information will be available to all Member States and the Council.

27.

Article 28: Communication


This Article concerns communication between competent authorities throughout the mutual recognition procedure. There is a general obligation of competent authorities to consult each other where necessary during the mutual recognition procedure in addition to the specific obligations laid down by individual articles of the proposal.

28.

Article 29: Multiple orders


If two or more orders concerning an amount of money are issued against the same person and there are not sufficient means to enable all the orders to be executed or if a specific property is covered by multiple orders, the executing State must decide which of the orders is or are to be executed with due consideration of the circumstances including the interest of victims, the involvement of frozen assets, the dates of the respective orders and the dates of transmission of the respective orders and if relevant the relative seriousness and the place of the offence.

29.

Article 30: Termination of execution


The issuing authority must immediately inform the executing authority of any decision or measure as a result of which the order ceases to be enforceable or must be withdrawn from the executing State for any other reason.

30.

Article 31: Management and disposal of frozen and confiscated property


The executing State shall manage the frozen or confiscated property before its definitive transfer with a view to prevent its depreciation in value.

This Article further clarifies the rules for disposal of the confiscated property. The victim’s right to compensation and restitution has been duly taken into account in that Article as it ensures that the victim’s right to compensation and restitution has priority over the states’ interest. Firstly, it provides that the sum corresponding to the decision on compensation or restitution will accrue to the issuing State for purposes of compensation or restitution to the victim. Secondly, if a procedure to compensate or restitute the victim is pending in the issuing State, the executing State must withhold the disposition of the confiscation property until the decision is communicated to the executing authority. This is a major novelty in the EU legal framework as neither of the two Framework Decisions contains any provision on victims. The provisions ensure that victims are not losing their rights in cases where the assets are located in another Member States; at the same time, the provision does not introduce any new right for victims where such right does not exist under national law.

Unless agreed otherwise, taking also into account the need to provide assistance for the recovery of tax claims in accordance with Directive 2010/24/EU, the following rules inspired by a rule of equity between Member States as set out in Framework Decision 2006/783/JHA apply: If the amount of the confiscation order is below 10.000 euros, the amount accrues to the executing State. Above this amount, 50% of the confiscated property is transferred to the issuing State in cash, or the entire property where it is transferred in kind with the consent of the executing State. If it is not possible to apply these rules, the property is disposed of in another way in accordance with the law of the executing State.

31.

Article 32: Costs


Costs must be borne either by the executing State when they arise on the territory of that State and by the issuing State in any other case. Where the executing State has had large or exceptional costs it may propose to the issuing State that the costs be shared.

32.

Article 33: Legal remedies in the executing State against recognition and execution


This Article provides for a legal remedy in the executing State against the recognition and execution of a freezing or confiscation order. Any interested party including bona fide third parties can bring an action before a court in the executing State to preserve his or her rights in accordance with the law of that State. The action may have suspensive effect under the law of the executing State. However, substantive reasons for issuing the confiscation order in criminal matters cannot be challenged before a court in the executing State.

33.

Article 34: Reimbursement


Except when the responsibility is exclusively due to the conduct of the executing State, the issuing State is liable to reimburse any sum of money paid in damages to any party following the execution of an order.

34.

Article 35: Statistics


This Article concerns an obligation of the Member States to regularly collect from the relevant authorities and maintain comprehensive statistics regarding mutual recognition of freezing and confiscation orders. The statistics collected will be sent to the Commission each year. As, currently, there is lack of comprehensive data regarding mutual recognition of freezing and confiscation orders this obligation appears to be necessary to allow a thorough assessment of the functioning of the mechanism laid down by this Regulation.

35.

Chapter V - Final provisions


Article 36: Amendments to the certificate and the form

The standard certificate and the form contained in Annex I and II of this proposal should serve as a useful tool to simplify and speed up to the maximum extent possible the mutual recognition and execution of freezing and confiscation orders. For this reason, it is necessary in the future to be able to address identified problems regarding the content of the certificate and the form as quickly as possible. Amending the two annexes through a complex fully-fledged legislative procedure does not correspond to this requirement. Therefore, a faster and more flexible procedure for amendments through delegated acts is laid down in Article 37.

36.

Article 37: Exercise of delegation


This article lays down the conditions under which the Commission has the power to adopt delegated acts to provide for necessary amendments of the certificate and the form annexed to the proposal. It lays down a standard procedure for adoption of such delegated acts.

37.

Article 38: Review clause


The Commission will report to the European Parliament and the Council on the application of this proposed Regulation five years after the entry into force.

38.

Article 39: Replacement


This Regulation will replace Framework Decisions 2003/577/JHA and 2006/783/JHA for the Member States that are bound by it. Framework Decisions 2003/577/JHA and 2006/783/JHA will continue to apply in relation to those Member States that are not bound by this Regulation.

39.

Article 40: Entry in force and application


The proposed Regulation will enter into force the twentieth day after its publication in the Official Journal. The Regulation will then apply six months after its date of entry into force with the exception of Article 27, which will apply from the date of entry into force of the Regulation.