Steve Peers

The European Court of Justice has worked to solidify the principle of effectiveness in EU criminal law through significant rulings like Pupino and those on environmental crime legislation. However, the EU legislature’s recent adoption of a new Directive on euro counterfeiting seems to contradict this, illustrating a principle of ineffectiveness.

Background

Currently, euro counterfeiting is addressed through various measures, notably a 2000 pre-Lisbon Framework Decision. This Decision, part of the former ’third pillar’, establishes substantive criminal law rules on currency counterfeiting, including the euro. It mandates that Member States criminalize the fraudulent production and alteration of currency, along with similar offenses.

These offenses must be met with “effective, proportionate and dissuasive criminal penalties,” potentially including imprisonment that could lead to extradition. Specifically, the fraudulent production or alteration of currency must carry a maximum penalty of no less than eight years. This marked the EU’s first instance of incorporating sentencing rules into substantive criminal law, a practice that has continued in most subsequent EU measures.

The New Directive

In its proposal to supersede the Framework Decision, the Commission aimed for another groundbreaking move: establishing a minimum sentence for specific crimes within EU legislation. The proposal suggested a minimum sentence of six months for certain currency counterfeiting offenses involving at least €10,000.

The Commission justified this by highlighting the lack of minimum sanctions, or the presence of only fines, for counterfeiting in several Member States. This, they argued, incentivized counterfeiters to exploit jurisdictions with lenient penalties. The Commission provided compelling evidence of this ‘forum-shopping’ in its impact assessment. Member States without minimum sanctions or with fines as the only penalty saw 343 cases of illegal printing press takedowns from 2002-2011 (86 cases per Member State). Conversely, eleven Member States with at least six-month prison sentences for counterfeiting saw only 179 cases (16 cases per Member State). This difference couldn’t be attributed to Member State size, as only one large Member State fell into the first category, while three were in the second. The Commission’s conclusion? “These figures seem to suggest that Member States with low levels of sanctions tend to attract counterfeiters.”

Despite this, the European Parliament and Council rejected the Commission’s minimum sentence proposal. The final Directive retains the eight-year maximum sentence for fraudulent production or alteration of currency and adds a five-year maximum for related crimes, but it omits minimum sanctions.

However, two other innovations from the Commission were adopted. Member States must now provide “effective investigative tools,” such as interception and undercover agents, for currency counterfeiting cases. This prevents investigations from being dropped due to the unavailability of such techniques, a situation illustrated in the impact assessment. Additionally, Member States must enable counterfeit identification during criminal proceedings, expediting the removal of counterfeit currency from circulation. The impact assessment provides an example of fake €500 notes being accepted due to a lack of early access to the counterfeits. The European Parliament also pushed for a new clause requiring the Commission to gather data on prosecution numbers.

The Directive’s adoption represents a step towards replacing pre-Lisbon third pillar acts with standard EU legislation, a trend seen with four other Framework Decisions replaced by Directives. This, however, holds less practical significance with the approaching end of the transitional period for pre-Lisbon third pillar acts. From December 1, 2014, standard rules on infringement actions and national court referrals will apply.

The Directive won’t apply to the UK and Denmark, mirroring the opt-out rules for the single currency (though all other non-eurozone Member States are, in principle, obligated to adopt the euro eventually). Although the Framework Decision currently applies to these countries, the UK has decided to opt out without seeking to opt back in, starting December 1 of this year. Should the UK then choose to decriminalize euro counterfeiting within its borders, it could be argued that this violates the EU law principle of ‘sincere cooperation.’

Comments

It’s perplexing that the EU legislature, despite valuing the Commission’s thorough impact assessments, would disregard the evidence presented. While a minimum criminal sentence might clash with the criminal law systems of certain Member States (systems that the Treaty rightly mandates the EU to respect), addressing this valid concern is best achieved by incorporating exceptions for those Member States within the relevant legislation.

Although there are generally sound reasons, based on subsidiarity and respect for national systems, for the EU to refrain from interfering with the fundamental principles of national sentencing systems, euro counterfeiting presents a unique situation. (Another such case is the protection of the EU’s financial interests, where the Commission has proposed, for the first time, intervening in national rules on statutes of limitations.) Counterfeiting the EU’s single currency inherently affects all Member States that use it, as well as those obligated to adopt it in the future, though less directly. Consequently, the EU legislature’s decision to apply the principle of ineffectiveness in this new legislation is disappointing.

Barnard & Peers: chapter 25