I. Institutional and Legal Framework of OLAF Investigations

The first cases after the establishment of OLAF confirmed and clarified its status and function and stipulated that the requirement of independence is closely related to strict observance of the Community law. In the Rothley¹ case, the European courts agreed that the European Parliament Decision concerning the terms and conditions for internal investigations² applies to objectively defined situations and has legal effects with respect to categories of persons envisaged generally and in the abstract, i.e. present or future Members of the European Parliament (MEPs), but also all the Parliament's staff members, whether or not they are covered by the Staff Regulations. This measure does not, on the one hand, constitute a decision of individual concern to the group of MEPs who lodged the application in this case before the Court of First Instance. On the other hand, the court also said that the possibility cannot be ruled out a priori that OLAF, in the course of an investigation, might take action prejudicial to the immunity enjoyed by every Member of the Parliament. If that were to occur, any Member of the Parliament faced with such an act could, if he considered it damaging to him, avail himself of the judicial protection and the legal remedies provided for by the Treaty. Thus the Court of First Instance clearly said there must be a judicial review at least afterwards. This was confirmed by the Court of Justice in appeal proceedings.

The Commission v European Central Bank³ and Commission v European Investment Bank⁴ cases confirm that the OLAF regulations express the Community legislator's determination to subject the powers conferred on OLAF, first, to guarantees intended to ensure OLAF’s complete independence, in particular from the Commission, and second, to strict observance of the rules of Community law, including, in particular the Protocol on the privileges and immunities of the European Communities, human rights and fundamental freedoms and the Staff Regulations of officials of the European Communities and the Conditions of Employment of other servants of the European Communities. Neither the fact that OLAF was established by the Commission and is integrated in its administrative and budgetary structures, nor the fact that the Community legislation has conferred investigative powers on this body, external to the other EC institutions and bodies such as ECB, can as such undermine the independence of the EC institutions and bodies. OLAF's Director General cannot decide to launch an investigation if there are no sufficiently serious suspicions; the authorisation in writing which must be carried by OLAF investigators must state the subject-matter of the investigation. The OLAF investigation system is specifically designed to allow suspicions of fraud, corruption or other illegal activity affecting the Communities’ financial interests to be checked. It is in no way related to systematic forms of monitoring such as financial control. OLAF’s investigative function differs in its nature and its objectives from general control tasks such as those of the Court of Auditors and the ECB external auditors.

II. OLAF Investigative Acts under Court Scrutiny

The aforementioned specific investigative function is what distinguishes the anti-fraud system from general monitoring activities. From the moment when its Director General decides to launch an investigation and throughout the ensuing proceedings, OLAF's investigative function focuses on checking serious suspicions of fraud, corruption or other illegal activities affecting the Communities’ financial interests. Such investigations must comply with general and specific rules, defined by Community case law. The European courts confirmed that OLAF investigations are under the obligation to respect of human rights and fundamental freedoms. For both internal and external investigations, case law places fundamental emphasis on honouring the guarantees attached to the exercise of OLAF's powers of investigation. The standards highlighted in the jurisprudence are the presumption of innocence, the principle of loyal cooperation, impartiality in the conduct of the investigation as well as the principle that all conclusions should be based on objective evidence. The courts consider that procedural guarantees for persons subject to internal or external investigation are an essential procedural requirement for investigations and the failure to honour them undermines the legality of the final decision. In the Gómez-Reino⁵ case, the Court of First Instance held that failure to take account of the rights of defence of an official under investigation, as guaranteed by Article 4 of the inter-institutional agreement between the European Parliament, the Council and the Commission⁶ constitutes a violation of the substantial formal requirements applicable to the investigation procedure and thereby affects the legality of the final decision of the appointing authority – in the present case the Commission as the competent authority for the disciplinary proceedings.

In this context, it should be emphasised that only acts of a final character which infringe the right of an individual can be challenged by means of action for annulment under Article 230 EC. Since acts of OLAF, such as final case reports, are non binding preparatory acts and are only recommendations to national and Community authorities without a mandatory character affecting the rights of an individual, they cannot be challenged in an action for annulment. Similarly, the Court of First Instance confirmed in the case Andalucía⁷ related to an external investigation that the letter from OLAF informing an economic operator that no action could be taken on his complaint about the final report can not be deemed a decision against which an action for annulment may be brought. The final report drawn up by OLAF at the end of the external investigation and sent to the competent authorities of the Member States is only a set of recommendations and opinions which have no mandatory legal effects that could impinge on the economic operator's economic interests by altering his legal situation. It is for the competent national authorities to decide what action should be taken on completed investigations on the basis of the final case report drawn up by OLAF. These national authorities are therefore the ones which may take decisions capable of affecting the legal position of the person concerned within their scope of discretion.

In the Tillack⁸ case it was stated the duty of the Member States to cooperate in good faith implies that when OLAF forwards them information pursuant to Article 10(2) of Regulation No 1073/1999, the national judicial authorities have to examine this information carefully and on that basis take the appropriate action to comply with Community law, if necessary by initiating legal proceedings. Such a duty of careful examination does not, however, require an interpretation of that provision to the effect that the forwarded information has binding effect. Therefore, an act by which OLAF forwards information relating to situations liable to lead to criminal proceedings to national judicial authorities is not capable of being challenged in an action for annulment under Article 230 EC. Again, national judicial authorities are the ones responsible for subsequent possible legal acts. In this case the applicant also claimed the damages, but according to the court the principle of sound administration does not, in itself, confer rights upon individuals, except where it constitutes the expression of specific rights such as the right to be heard or the right to have affaires handled impartially. Moreover, the classification of the conduct of a Community institution as an “act of maladministration” by the European Ombudsman does not mean, in itself, that the conduct constitutes a sufficiently serious breach of a rule of law. The institution of the Ombudsman offers an alternative non-judicial remedy to the court proceedings and does not necessarily have the same objective as judicial proceedings.

III. Extra-Contractual Liability of the Commission

After the delivery of these judgments, it may have seemed that OLAF's investigative acts are non-attackable and exempt from effective judicial review, the reason being that they do not produce legal effects vis-à-vis the individual. It may have seemed that implicit reviews by the Community (disciplinary proceedings) or national courts (criminal proceedings) a posteriori are the only option. This was refuted by the subsequent judgments where the court held that OLAF's acts indeed may give rise to liability and the persons concerned may claim before the Court of First Instance under certain conditions for damages through non-contractual liability under Article 288 second paragraph EC in connection with Article 235 EC. The court held that action for damages is an independent type of action which is subject to different conditions with a view to its specific purpose. Thus the inadmissibility of an action for annulment does not automatically entail the inadmissibility of an action for damages. For damages to be granted several conditions have to be met: first, the rule of law infringed must be interpreted as conferring rights on individuals; second, there must be a sufficiently serious breach; third, there must be a damage and fourth, there must be a direct causal link between the breach of that rule of law and the damage sustained by the person concerned. In the existing case law the non-contractual liability of the Commission towards a person concerned by an OLAF investigation arose as a consequence of a violation of legal principles and statutory rules protecting the rights of an individual, such as the presumption of innocence, obligations of impartiality and confidentiality, due care when transmitting information to third parties and communicating with the public or the defence rights. Damages can even be awarded for immaterial prejudice. Thus liability under Article 288 second paragraph EC has lead to an "indirect review" where the Community courts have highlighted the above mentioned guarantees. Individuals who cannot contest directly certain OLAF's investigative acts or measures by way of an action for annulment under Article 230 EC, have the opportunity of challenging conduct lacking the features of a decision having legal effect upon them, by bringing an action for damages via non-contractual liability of the Community.

The Camós Grau⁹ case concerns the presumption of innocence and conflict of interest. The investigation had initially been conducted by a possibly partial investigator. Even though he was later taken out of the investigation, all evidence in the file had not been re-evaluated. The mere presence of this evidence made it for the tribunal a breach of impartiality. This is a fault which is capable of giving rise to non-contractual liability on the part of the Community. Moreover, the undue accusations made by OLAF against the official in its final report on the investigation, attributing to him wrongful acts that would have rendered him liable to criminal and disciplinary action, seriously impairing his honour and reputation, constitute non-pecuniary damage justifying pecuniary compensation.

The concept of the presumption of innocence is further developed in the Giraudy¹⁰ case where the European Union Civil Service Tribunal ordered the Commission to pay damages for the compensation of non-material harm consisting in prejudice to the applicant's reputation and honour caused by the publicity which followed the opening of OLAF's investigation and suggested that he was suspected of involvement in the irregularities and fraud which were to be investigated. Article 8(2) of Regulation No 1073/1999 defines in a broad way a confidentiality rule applicable to OLAF investigations. This rule must be interpreted as not only aiming to protect the confidentiality of information for gathering the facts, but also to safeguard the presumption of innocence, and therefore the reputation of the officials or servants concerned with these investigations. The successful performance of an investigation may require keeping it secret towards those persons concerned by the investigation.

The case Nikolaou¹¹ concerns the respect of defence rights, which must be guaranteed in administrative investigations. The subject of the investigation must be communicated at an early stage and before drawing conclusions in an internal investigation OLAF must invite the persons concerned to express their views about the facts. For this principle there is the exception of imperative requirements of secrecy – it may be deferred only exceptionally in cases requiring absolute secrecy for the purposes of the investigation and requiring the use of means of investigation falling within the competence of a judicial authority. Furthermore, OLAF must take measures to ensure that no information concerning OLAF investigations is leaked, given that such a leak constitutes a violation of the personal data protection rules. In presence of serious allegations affecting the good reputation of an official, the administration must avoid the publication of any allegations which are not strictly necessary. On the one hand, the administration must avoid giving to the press information which could damage the official and, on the other hand, take all the necessary steps to prevent, within the institution, any form of divulgation of the information which could have a defamatory effect. OLAF violates the rights of defence, in particular the presumption of innocence, when confirming the veracity of certain facts which had already been exposed in the press. Even indirect information which does not refer explicitly to a specific person by name, but makes it easy to identify that person, can cause non-material damage entitling for compensation.

The trend of awarding damages for extra-contractual liability of the Community was followed by the court also in the most recent case related to OLAF – Franchet & Byk.¹² It concerned an internal investigation involving two officials who were suspected of being involved in certain irregularities in financial management. The Court of First Instance stressed that the case did not concern the question whether the facts alleged were proven or not, but the way in which OLAF conducted and concluded an investigation which referred to these officials by name and possibly attributed to them responsibility for the irregularities in public well before a final decision of the competent authority was taken. The fact that OLAF referred to them publicly as guilty of criminal offences, including through leaks to the press, is in breach of the principle of presumption of innocence, the obligation of confidentiality in investigations and the principle of sound administration. Moreover, not informing the persons concerned and the Supervisory Committee of the handing over of the files to the national judicial authorities while at the same time not satisfying the conditions for the exception for cases requiring absolute secrecy to be maintained for the purposes of the investigation, constitutes an infringement of the rights of defence. As a result, the court held that the officials were confronted with feelings of injustice and frustration and suffered damage to their honour and professional reputation. OLAF’s (and Commission's) conduct resulting in such non-pecuniary damage was capable of rendering the Community liable.

IV. Conclusion

As can be seen from the above mentioned judgments, OLAF investigations are subject to effective judicial control. The case law and its influence on OLAF's investigative procedures are still evolving. New questions are emerging. Is it possible to anticipate further developments? Is there a clear direction? Can we set any limits? What should be the reaction of OLAF, if any? The responses to these and similar questions perhaps might be found in the future judgments of pending cases or legislative initiatives to reform OLAF. The Commission proposal to amend Regulation (EC) No 1073/1999 concerning investigations conducted by the European Anti-Fraud Office aims at improving the operation of OLAF in the existing framework which proved satisfactory and functioning.¹³ As confirmed by the European Court of Justice in the judgment in case Commission v ECB,¹⁴ Regulation (EC) No 1073/1999 in its original form already reflects the firm determination of the legislative authority to make any powers granted to OLAF subject to full respect for human rights and fundamental freedoms. Therefore it seems appropriate for the procedural guarantees to apply to all investigations conducted by OLAF, both internal and external. These guarantees respect the fundamental rights recognised in particular by the Charter of Fundamental Rights of the European Union, or even exceed the minimum level of protection required by the Charter. The planned new Review Adviser’s function would be an additional measure which, far from being a substitute for judicial review by the Community courts, is designed to reinforce upstream control measures. However, enhanced governance, combined with the establishment of the Review Adviser, further procedural guarantees and the provisions on the flow of information between OLAF and the institutions, bodies, offices and agencies concerned, should help to strike the right balance between independence and control.