Analysis
11 January 2022

The European Public Prosecutor’s Office (EPPO) is off to an active and promising start

An analysis of the beginnings of the European Public Prosecutor’s Office and review of its investigations and first successes, including its first conviction in November 2021 for misappropriation of European funds in Slovakia.

 

The European Public Prosecutor’s Office (hereinafter “EPPO”) was created by the Council Regulation (EU) 2017/1939 of 12 October 2017 and introduced in France by Law n°2020-1672 of 24 December 2020. Although the EPPO, which is based in Luxembourg, only began its activities on 1 June 2021, it already seems to have a key role in the fight against criminal activities which threaten or compromise the financial interests of the European Union (hereinafter “the Union”). Indeed, in only six months, the first independent[1] supranational European prosecution authority has opened hundreds of investigations and obtained on 22 November 2021, its first conviction in a case regarding misappropriation of European funds[2].

This success is an opportunity to highlight the main characteristics of the EPPO and review its undertaken actions up to date, particularly in the fight against fraud.

 

I.  The EPPO’s goal is to combat offences prejudicial to the financial interests of the European Union

Based on Article 86 of the Treaty on the Functioning of the European Union[3], the Council Regulation 2017/1939 of 12 October 2017, implementing enhanced cooperation on the establishment of the European Public Prosecutor’s Office materialized the European Union’s determination to fight threats made to its financial interests[4]. All Member States adhered, except Hungary, Denmark, Poland, and Sweden.

The EPPO is structured in two levels: (i) the central level, composed of the European Chief Prosecutor, the European Prosecutors (twenty-two prosecutors representing each of the Member States) and the Administrative Director, (ii) and the decentralised level, composed of the prosecutors acting on behalf of the European Public Prosecutor’s Office in their respective states as national prosecutors, known as European Delegated Prosecutors[5]. It is responsible for “investigating, prosecuting and bringing to judgment the perpetrators of, and accomplices to, criminal offences affecting the financial interests of the Union”, and in that respect will “undertake investigations, and carry out acts of prosecution and exercise the functions of prosecutor in the competent courts of the Members States, until the case has been finally disposed of”[6].

Thus, the European Delegated Prosecutors are responsible for conducting investigations, initiating prosecutions and preparing the cases that they have taken in their State[7], under the supervision of the European Prosecutors and the Permanent Chambers. These Chambers are formed of European Prosecutors and headed by the European Chief Prosecutor, one of his or her deputy or a European Prosecutor appointed as President. They monitor and direct investigations and prosecutions (judgment by the national authorities, dismiss of a case, referral to the national authorities, reopening of an investigation) and ensure their coordination in cross-border cases[8].

They are competent in matters of fraud affecting the financial interests of the Union committed within the framework of a criminal organization or not, and to all other inextricably linked criminal offences[9]. They are also competent in matters of laundering of assets resulting from these frauds, passive and active corruption and misappropriation[10]. The notion of “financial interests of the Union” has been defined as “all revenues, expenditures and assets covered by, acquired through, or due to the Union budget and the budgets of the institutions, bodies, offices and agencies established under the Treaties and budgets managed and monitored by them[11].

Frauds affecting the financial interests of the Union may for example include the presentation of false documents resulting in the misappropriation or wrongful retention of funds or assets of the Union budget or managed by it, or the misappropriation of funds or assets for purposes other than those for which they were originally granted. This applies to both procurement-related expenditure and revenue from VAT resources[12], it being specified that in cross-border VAT fraud cases, the EPPO is only competent when it results in a total loss of at least 10 million euros[13].

All of these offences must have been committed after 20 November 2017 within the territory of the Members States or by a national of a Member State or an agent of the Union if a Member State has jurisdiction over such offences when committed outside its territory[14].

 

II.   In just six months of operation, the EPPO has opened hundreds of investigations and obtained one conviction for misappropriation of European funds

A month and a half after its debut, the EPPO claimed to have processed more than 1,000 fraud reports and seized 7 million euros worth of goods[15]. Two months later, it claimed to have registered more than 1,700 reports and opened 300 investigations for damage caused to the budget of the European Union estimated at more than 4.5 billion euros[16].

After nearly six months of operation, Laura Codruta Kövesi, European Chief Prosecutor, mentioned the examination of 2,500 reports and the opening of 500 investigations for damage caused to the budget of the European Union estimated at 5 billion euros[17].

The statements regarding the EPPO’s operations on its website provide information on some of the investigations initiated but do not provide details on the way it receives cases that fall within its scope of competence (reporting via a form on its website[18] or communications from other authorities of the Union or the Member States[19]) and the framework in which the investigation are opened (spontaneous opening or right of evocation[20]). Nevertheless, after studying these statements[21], which represent only a minimal part of the current investigations, it appears that up to now:

  • The investigation acts carried out mainly consisted of searches, arrests, and seizures. None of the cases reported involved complex technical investigation techniques provided for in the Regulation such as the interception of electronic communications or the tracking and tracing of objects[22].
  • Most of the current investigations relate to fraud, in particular misappropriation of European funds and VAT carousel fraud. Some are also related to abuse of function, corruption, influence peddling and counterfeit cigarette traffic. All these offences are related to different areas such as real estate projects or infrastructure development with European funds, medical protection equipment, luxury boats and cars, and biodiesel.
  • At least two cases involve public officials (a mayor and members of a ministry).
  • Member States and/or the European Union damages vary for each case from a few tens of thousands of euros to several millions. Indeed, the damages extend from 57,000 euros to 23 millions euros.
  • The EPPO’s operations were mainly carried out in Italy, in Eastern European countries such as Croatia, Slovakia, Bulgaria, Hungary and the Czech Republic, but also in Austria, Germany, and the Netherlands.
  • The EPPO’s intervention facilitated cooperation between Member States. Indeed, several cross-border investigations have been carried out, sometimes involving four to five different Members States. For example, searches were conducted simultaneously in Germany, the Netherlands, Slovakia, Bulgaria, and Hungary in a VAT fraud case, and one of the European Delegated Prosecutor pointed out that “[w]ithout the EPPO, setting up this operation would have taken months. Now it was a matter of weeks”[23]. Also, regarding a VAT carousel fraud case in Germany, Italy and Bulgaria, European Chief Prosecutor stated that “[t]his operation demonstrates the paradigm shift that the creation of the EPPO has brought about for cross-border investigations. This is the new reality of the EPPO zone: no more cumbersome mutual legal assistance formalities; speedy and decisive action; and focus on effective damage recovery”[24].
  • As provided for in the Regulation[25], the EPPO acted in cooperation with the European Anti-Fraud Office (“OLAF”) in a fraud case involving the Croatian Ministry of Regional Development and European Funds. However, none of the other investigations on which the EPPO communicated seem to have been carried out in relation to other institutions, bodies, offices and agencies of the Union or to Eurojust and Europol although these situations are also specifically provided for in the Regulation[26].

In addition to ongoing investigations, the EPPO also communicated on its first conviction obtained on 22 November 2021 during a hearing before a Slovakian criminal court[27]. This court sentenced a former mayor of a commune in the east of the country to a three-year suspended prison sentence and a five-year prohibition on exercising a public office[28]. The former mayor admitted that he had attempted to misuse European funds by falsifying various documents in order to illegally obtain financial support from the European Social Fund for the local services’ co-financing. The damage the European Union would have suffered without the intervention of the EPPO has been estimated at more than 93,000 euros[29].

Given the hundreds of cases opened by the EPPO since it became operational, other decisions should be pronounced in the coming months or years by different European jurisdictions. This was confirmed by the Slovakian European Prosecutor, Juraj Novocký, who stated that in addition to this first conviction, more complex cases should be tried in 2022[30].

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