I. Introduction

When the European Anti-Fraud Office (OLAF) was created in 1999, it was in a context of determination that criminal behaviour to the detriment of the financial interests of the European Communities should face decisive reaction, but the focus was upon the creation of a body which was conclusively administrative in nature.¹ Although the need to address behaviour viewed as harmful and to prevent such behaviour in the future was strongly outlined, the methods chosen to achieve this were explicitly of this regulatory nature.

One was not, however, blind to the nature of the territory to which OLAF’s work would apply. Article 1 of Regulation 1073/1999 identifies OLAF’s raison d’être to be “in order to step up the fight against fraud, corruption and any other illegal activity affecting the financial interests of the European Community.” The threats to the European Community were clearly regarded as including crimes but OLAF was apparently created as an instrument to encourage the correct reaction to illegal activity, i.e. its prosecution. Discussion was of a purpose to “coordinate” the activities of Member States’ competent authorities and to “contribute to the design and development of methods of fighting fraud and any other illegal activity affecting the financial interests of the European Community.” Inevitably, one must conclude that the mechanism in existence were fundamentally viewed as being adequate to deal with the problems at hand or as having to be sufficient; at most, support in doing so was to be provided.

Fittingly, the vast majority of legislation providing for OLAF and its powers focus on administrative measures to counter and ensure the compensation for irregularities as well as undesired behaviour detrimental to the financial interest of the Communities. The impression is of a regulatory body intended to ensure the rules are stuck to; it’s role was at most to provide, where necessary, a little assistance for pre-existent criminal justice institutions to ensure matters are adequately dealt with where extreme cases of their breach are discovered. The sense was of assistance needed to steer existing criminal justice mechanisms in the right direction and certainly not of a need to create new criminal justice instances.

This paper sets out to review this perspective on OLAF’s work ten years on. At a time when the Treaty of Lisbon throws up controversial questions as to the EU’s criminal justice profile in an atmosphere already rife with discussion of the EC’s criminal law competence, this aspect clearly deserves particular attention. It is submitted that OLAF’s work is marked so strongly by a criminal justice character that a continued discussion of it as an administrative body is little short of a fallacy. OLAF’s work does clearly display factors pulling for the creation of a European criminal justice system whilst the deficits arising out of the failure to place its work in the appropriate context give rise to problems which should cause one to insist upon placement within a criminal justice framework: a push towards a European criminal justice system.

II. OLAF’s Investigative Powers

The administrative role envisaged for OLAF is reflected firmly in the provision made for OLAF’s powers (and the protection of any persons who might be affected by them). Regulation 1073/1999 lays down OLAF’s ability to carry out “inspections, checks and other measures” – rather weak sounding powers which it goes on to state do not affect “the powers of the Member States to bring criminal proceedings” (e.g. in Article 2). As is usual in EC matters,² no powers equivalent to those of the respective Member States’ criminal justice institutions are assigned.

The most invasive measure as regards external investigations: on-the-spot checks, are regulated more closely by Council Regulation 2185/96. Article 2 of the Regulation provides:

The Commission may carry out on-the-spot checks and inspections pursuant to this Regulation: for the detection of serious or transnational irregularities or irregularities that may involve economic operators acting in several Member States, or where, for the detection of irregularities, the situation in a Member State requires on-the-spot checks and inspections to be strengthened in a particular case in order to improve the effectiveness of the protection of financial interests and so to ensure an equivalent level of protection within the Community, or at the request of the Member State concerned.

Article 4 stipulates very clearly:

On-the-spot checks and inspections shall be prepared and conducted by the Commission in close cooperation with the competent authorities of the Member State concerned, which shall be notified in good time of the object, purpose and legal basis of the checks and inspections, so that they can provide all the requisite help. To that end, the officials of the Member State concerned may participate in the on-the-spot checks and inspections. In addition, if the Member State concerned so wishes, the on-the-spot checks and inspections may be carried out jointly by the Commission and the Member State's competent authorities.

In other words, great care is taken to ensure that OLAF’s powers cannot intervene with the affected state’s jurisdiction and if the latter views any such actions as sensitive, provision can be made to prevent coercive powers being exercised in any way other than the one it wishes. OLAF’s powers are clearly demarcated to leave it as an agency dependent upon good-will without the ability to act swiftly and independently one would usually expect from an investigative body. Thus, in respect of the ability to work independently of the good-will of those it investigates, it appears clearly to be located outside the criminal justice realm. This is to remain the reserve of the Member States – OLAF is expected to manage a parallel task, without parallel powers.

Confirmation of this status can be found in Article 7 of said Regulation which states:

Commission inspectors shall have access, under the same conditions as national administrative inspectors and in compliance with national legislation.

And conclusively in Article 9 which reads:

Where the economic operators referred to in Article 5 resist an on-the-spot check or inspection, the Member State concerned, acting in accordance with national rules, shall give Commission inspectors such assistance as they need to allow them to discharge their duty in carrying out an on-the-spot check or inspection.

OLAF’s powers explicitly are not of the coercive nature associated with policing bodies; at least where such policing bodies already exist. Article 9 goes on to reflect that it is the responsibility of national authorities to ensure compliance with their laws, perhaps reflecting an expectation that OLAF staff cannot ensure this.

In relation to internal investigations, however, OLAF has powers one might view as approaching policing measures, namely in accordance with Regulation 1073/1999 “the right of immediate an unannounced access to any information held by the institutions, bodies, offices and agencies and to their premises” and a right to “request oral information” (Article 4(2)). Internally it is to police the behaviour of those with potential to harm the EC in a seemingly straightforward manner. One might well feel justified in regarding these as the powers appropriate to the results expected of OLAF, appreciating that there was no political opposition to prevent their assignment in this area.³

The freedom with which these powers were allotted is visible also by the lack of boundaries set to them. They are flanked by vague requirements to act proportionally and with a suitable attitude (Article 6) - provision which indicates that we are dealing with procedures far removed from the animosity of criminal trials and, which simultaneously ensure that – where considerable powers are exercised, these have maximum impact.

III. The Nexus to Criminal Justice Systems or the Reality of OLAF’s Work

Despite the emphasis of a non-criminal justice nature associated with OLAF the nexus to criminal justice matters is undeniable. The context of OLAF’s creation displayed a clear connection to criminal offences such as corruption and fraud. The need to create OLAF was because existing mechanisms were not adequately dealing with the threats – both internal and external – to the financial interests of the EC.⁴

Any desire to ensure OLAF provides only quiet, administrative work in protecting the EC’s financial interests or minimal assistance where a criminal justice system response is appropriate, has been stopped short by reality. OLAF’s work of the past ten years bears witness to the EC’s financial interests as under threat by criminal offences and to existing criminal justice mechanism as unwilling or unable to adequately address these.

There is plenty of reason to believe that this fact was known and assumed from the start. A key indicator is to be found in the requirement of Article 9 (3) of Regulation 1073/1999 that reports “shall constitute admissible evidence in administrative or judicial proceedings.” In other words, it was always assumed that OLAF’s work would need to be directly utilisable in criminal proceedings. Thus, it has always been clear that OLAF’s staff are required to be competent to interact with criminal justice systems across Europe. Article 10 (2) made it clear that a role in criminal proceedings was and is foreseen for OLAF. The intent was certainly not to create a criminal justice agency but a door was left open for OLAF to play a role in criminal proceedings. It can also come as little surprise that frustration arises where staff must be capable of interacting with criminal justice systems across Europe in order to perform the tasks assigned to them but are deprived of the legal competence to do so and therewith the ability to impact in the most effective way possible.

IV. OLAF’s Work in Numbers

OLAF’s work so far is quite clearly marked by this interaction with criminal justice systems. The 2007 Activity Report features case study descriptions more frequently than not of clear criminal justice relevance.⁵ Furthermore, there is evidence of OLAF‘s role as a specialist in the criminal justice process. The report emphasises that OLAF’s work concentrates on serious cases.⁶ Where these require judicial follow-up, they would appear to be very serious indeed with a third of penalties imposed being prison sentences, a slightly smaller proportion suspended sentences and financial penalties respectively (many of which are certainly punitive in nature) and only a small proportion of these cases punished resulting in damages.⁷

The penalties imposed so far relate only to a small proportion of cases but the conclusion drawn is confirmed by broader statistics. Over the years of OLAF’s existence the figures relating to follow-up activity display 38% as requiring judicial follow-up, 42% financial and 15% administrative to the end of 2007. ⁸ For those who might wish to argue that these figures speak against OLAF’s work being of a criminal justice nature (because the majority of cases do not lead to a criminal justice system follow-up), one should note that the proportion of cases brought to court by prosecution services in Member States (i.e. standing any chance of meeting a true criminal justice system response) are often below 30%.⁹ Furthermore, the trend to replace classic criminal justice system reactions with financial penalties which are in fact punitive in nature is currently a global trend.¹⁰ The implication is thus that OLAF cases are more strongly of criminal justice relevance than the caseloads of many classic, national criminal justice institutions across Europe.

In any case, judging by its follow-up recommendations, it would seem clear that it’s follow up decision choices indicate a legitimate claim that OLAF might well be regarded as part of a European criminal justice chain. Even if OLAF performs tasks which might be achieved by Member States’ criminal justice agencies, the statistics indicate that the latter do not perform this task. OLAF appears to be better placed to deal with at least the investigation of serious cases requiring criminal justice follow-up. Speculation as to what this means can range far and wide: OLAF may merely be performing work which national criminal justice bodies could undertake themselves but choose not to due to a lack of resources or because OLAF does it for them. Given the complexity of fraud cases,¹¹ the multitude of specific European regulations and the trans-national nature of cases identified at the European level, one can, however, reasonably assume that OLAF’s work is needed.¹²

As the Office has become a permanent feature of the legal landscape, the proportion of criminal assistance cases it deals with has sunk, not least likely as a result of it choosing to deal with the “right” cases, the ones Member States’ authorities can not deal with alone. These could not be brought to criminal trial without OLAF’s analytical work. OLAF may not be a policing body, but what percentage of policing work in fraud or corruption cases is of the nature of work that OLAF can do? Is reality perhaps indicating the need for at least a European say in criminal justice processes?¹³ Providing a push towards a European criminal justice system for such cases?

The trend noted by the 2007 Activity Report that OLAF work now consists of a “75% share of own investigations”,¹⁴ further indicates that OLAF covers a special niche in the “market,” one which this office specialises in identifying and pursuing. Where such cases are of criminal justice relevance, OLAF is a criminal justice expert. Most significantly, this work is emphasised as being determined above all because OLAF’s caseload increasingly comes from areas in which “Member States do not exercise specific responsibilities.”¹⁵ OLAF’s work has come to filling a gap created by the nature of the EC set-up¹⁶ in contrast to the national protection mechanisms in existence. This indicates a need for new mechanism to provide adequate protection: a push factor towards new, European criminal justice mechanisms.

V. Legal Aspects

All other factors apart, OLAF’s status as other than criminal justice in nature, has left those subject to investigation feeling somewhat under-protected. OLAF investigations are a tool of sharp enough nature to leave those affected feeling that their procedural needs are not given sufficient consideration as demonstrated by cases resulting from internal investigations brought before the European Court of Justice¹⁷ and the consensus that relevant reforms are necessary in the OLAF regulatory framework.¹⁸

The current system sees individual rights provided for in a patchwork of individual provisions rather than a Constitution or a “Code of Criminal Procedure”. It is interesting to note, however, that (within the supra-national European context) procedural rights are either provided for in a way similar to in criminal justice systems or their absence is heavily criticised.¹⁹A system with ever more parallels to criminal justice frameworks is arising. The cases Nikolaou²⁰ and Franchet & Byk²¹ as well as the planned creation of the office of a Review Adviser²² demonstrate the need for a parallel rights system in administrative proceedings such as those OLAF is responsible for. One may be forgiven for wondering why a parallel system is to be created rather than the one tried and tested used, namely criminal procedure

Above all, the desire of those affected, such as in the Andalucía²³ case to prevent the transfer of information discovered in the course of investigations as well as the opinions formed from OLAF to national authorities is demonstrative of the quality and influence of these. Such a conclusion is confirmed by the duty of the latter explored in the Tillack²⁴ case to examine the information transferred carefully and to take appropriate action to comply with Community law. The transfer will not automatically cause a certain response but a national prosecutor is bound e.g. by a standard of reasonableness, to act in order to enforce Community law. This means that OLAF can be an important chain link in a criminal justice process, where the information that its work has uncovered, is of relevance to it; significant enough for those affected to legitimately want a say. The failure to provide for this so far is a push towards mechanisms which might ensure this; towards a balanced (EU) set-up as arguably provided by national criminal justice systems.

Dissatisfaction with the protection afforded to suspects in OLAF investigations can be seen as a push factor to placing these in a framework better known to respect rights – perhaps to a European criminal justice system. Current alternative efforts can be seen as attempts to re-invent the wheel for the sake of not calling a spade a spade and placing criminal justice matters fully in the hands of a criminal justice system.

IV. Final Reflections

The European Community has advanced together with the second and third pillar policy areas to become a very significant level of governance – a true community of sorts. Above all a Community with a considerable budget and reach. Certainly, with proportions one would expect to be protected. In a time when the EU finance ministers come together to make considerable efforts to counter tax-evasion at the national level, one would certainly expect such a large pool of tax payers money to be well shielded from fraud. The different quality of investigative powers in the national and supra-national context are doubtless food for thought seen from this perspective. “Opportunity makes the thief” an old wisdom goes and unpoliced valuables are nothing, if not an opportunity. OLAF’s status as definitively not a police body is thus legitimately under review from many angles.

Mechanisms created to facilitate Member States’ criminal justice systems to protect the interests of the EU (arguably such as OLAF but perhaps most famously in the form of joint investigation teams) do not appear to be adequate to provide for their protection. This is perhaps not surprising in a time in which they are having to choose which interests of their own to protect when allocating precious criminal justice system resources. OLAF’s 10th birthday nevertheless provides an opportunity to reflect on the work done so far and lessons to be drawn from it. One is perhaps that OLAF is not merely and administrative agency.

OLAF’s anniversary comes at a decisive time: the Treaty of Lisbon provisions mean we stand at the brink of radical change for the European Union, not least for matters of criminal justice relevance within it. The qualification of OLAF’s work as administrative or not and the extent of powers assigned to it, as well as the position of those subject to its investigations must be assessed in detail and possibly considered anew. The last ten years have provided grounds for reflection, the next ten certainly will too.