PROTECTING THE EUROPEAN COMMUNITY'S FINANCIAL INTERESTS >

Convention on the protection of the European Communities' financial interests

The Union aims to combat fraud affecting expenditure and Community revenue by taking appropriate criminal-law measures, such as criminalisation of fraud, criminal penalties, criminal liability of heads of businesses and rules on jurisdiction.

ACT

Council Act of 26 July 1995 drawing up the Convention on the protection of the financial interests of the European Communities [OJ C 316, 27.11.1995].

SUMMARY

With this Act, the Council has drawn up a Convention to tackle fraud affecting the financial interests of the European Communities. Under the Convention, fraud affecting both expenditure * and revenue * must be punishable by effective, proportionate and dissuasive criminal penalties in every Member State.

The Convention requires each Member State to take the necessary measures to ensure that the conduct referred to above, as well as participating in, instigating, or attempting such conduct, are punishable by effective, proportionate and dissuasive criminal penalties. In cases of serious fraud, these penalties must include custodial sentences that can give rise to extradition.

Each Member State must also take the necessary measures to allow heads of businesses or any persons having power to take decisions or exercise control within a business to be declared criminally liable in accordance with the principles defined by its national law in cases of fraud affecting the European Communities' financial interests.

Each Member State must take the necessary measures to establish its jurisdiction over the offences it has established in accordance with its obligations under the Convention.

If a fraud constitutes a criminal offence and concerns at least two Member States, those States must cooperate effectively in the investigation, the prosecution and the enforcement of the penalties imposed by means, for example, of mutual legal assistance, extradition, transfer of proceedings or enforcement of sentences passed in another Member State.

In the event of disputes between the Member States as to the interpretation or application of the Convention, the case must first be examined within the Council. If the Council has not found a solution within six months, a party to the dispute may petition the Court of Justice of the European Communities. The Court of Justice also has jurisdiction over disputes between Member States and the Commission.

Background

Adopted under Title VI of the Treaty on European Union, the Convention and its Protocols are aimed at creating a common legal basis for the criminal-law protection of the European Communities' financial interests.

The Convention entered into force on 17 October 2002, along with its first Protocol and the Protocol on its interpretation by the Court of Justice (ECJ Protocol). The second Protocol has not yet, however, entered into force. The Convention and its protocols are open for signing by any state that joins the EU. Of the Member States that joined the EU on 1 May 2004, the Czech Republic, Hungary, Malta and Poland (and Estonia with regard to the ECJ Protocol) have still to sign the Convention and its Protocols.

Key terms in the Act
Expenditure fraud: any act or deliberate omission involving the use or presentation of false, incorrect or incomplete statements or documents, which has as its effect the misappropriation or wrongful retention of funds from the general budget of the European Communities or budgets managed by, or on behalf of, the European Communities, non-disclosure of information in violation of a specific obligation, with the same effect; the misapplication of such funds for purposes other than those for which they were originally granted. Revenue fraud: any act or deliberate omission involving the use or presentation of false, incorrect or incomplete statements or documents which has as its effect the illegal diminution of the resources of the general budget of the European Communities or budgets managed by, or on behalf of, the European Communities, non-disclosure of information in violation of a specific obligation, with the same effect; misapplication of a legally obtained benefit, with the same effect.

Key terms in the Act

Expenditure fraud: any act or deliberate omission involving the use or presentation of false, incorrect or incomplete statements or documents, which has as its effect the misappropriation or wrongful retention of funds from the general budget of the European Communities or budgets managed by, or on behalf of, the European Communities, non-disclosure of information in violation of a specific obligation, with the same effect; the misapplication of such funds for purposes other than those for which they were originally granted.
Revenue fraud: any act or deliberate omission involving the use or presentation of false, incorrect or incomplete statements or documents which has as its effect the illegal diminution of the resources of the general budget of the European Communities or budgets managed by, or on behalf of, the European Communities, non-disclosure of information in violation of a specific obligation, with the same effect; misapplication of a legally obtained benefit, with the same effect.

RELATED ACTS

Second report from the Commission - Implementation by Member States of the Convention on the Protection of the European Communities' financial interests and its protocols [COM(2008) 77 - not published in the Official Journal].
Following up the first report, drawn up in 2004, the Commission examines the progress made by the 27 Member States in ratifying and implementing the instruments for protecting the European Communities' financial interests. The report highlights the problems arising from the frequent delays in ratification and cases of incorrect implementation.

Council Decision 2008/40/JHA of 6 December 2007 concerning the accession of Bulgaria and Romania to the Convention, drawn up on the basis of Article K.3 of the Treaty on European Union, on the protection of the European Communities' financial interests, the Protocol of 27 September 1996 , the Protocol of 29 November 1996 and the Second Protocol of 19 June 1997 [Official Journal L 9, 12.1.2008].
With this Decision, Bulgaria and Romania acceded to the Convention and its Protocols.

Report from the Commission - Implementation by Member States of the Convention on the Protection of the European Communities' financial interests and its protocols [COM(2004) 709 - not published in the Official Journal].
This report focuses on the implementation of the Convention and its Protocols by the 15 Member States prior to the enlargement of 1 May 2004. It considers that progress has been made in the criminal-law protection of the European Communities' financial interests thanks to the national legislation adopted in the Member States but regrets that none of them has taken all the measures needed to comply fully with the Convention. The Commission recommends that the Council invite the Member States to step up their efforts to strengthen national criminal legislation and ratify without delay the second protocol

Explanatory Report on the Second Protocol to the Convention on the protection of the European Communities' financial interests (Text approved by the Council on 12 March 1999) [Official Journal C 91, 31.3.1999].

Second Council Protocol of 19 June 1997 to the Convention on the protection of the European Communities' financial interests [Official Journal C 221, 19.7.1997].
This Protocol is aimed in particular at the liability of legal persons, confiscation, money laundering and cooperation between the Member States and the Commission for the purpose of protecting the European Communities' financial interests and protecting personal data related thereto. This Protocol is not yet in force.

Protocol of 29 November 1996 on the interpretation, by way of preliminary rulings, by the Court of Justice of the European Communities of the Convention on the protection of the European Communities' financial interests [Official Journal C 151, 20.5.1997].
This Protocol allows national courts to petition the Court of Justice for preliminary rulings interpreting the Convention on the protection of the European Communities' financial interests and its Protocols. It entered into force on 17 October 2002.

Explanatory Report on the Protocol to the Convention on the protection of the European Communities' financial interests (Text approved by the Council on 19 December 1997) [Official Journal C 11, 15.1.1998].

First Protocol of 27 September 1996 to the Convention on the protection of the European Communities' financial interests [Official Journal C 313, 23.10.1996].
This Protocol focuses on the definition of the concepts of "official" and active and passive "corruption" and on the harmonisation of penalties for corruption offences. An explanatory report to this Protocol was adopted on 19 December 1997 It entered into force on 17 October 2002.

Explanatory Report on the Convention on the protection of the European Communities' financial interests (Text approved by the Council on 26 May 1997) [Official Journal C 191, 23.6.1997].

Last updated: 22.2.2008