Leg. Dev.: Protection of Community Financial Interests

2 Colum. J. Eur. L. 385 (1996)

Christopher Wyeth Kirkham.
Rajesh Swaminathan.

On December 18, 1995, the Council adopted Council Regulation 2988/95 on the protection of the European Communities financial interests (1995 O.J. (L 312)). The Regulation, adopted under Article 235 of the EC Treaty, establishes general rules aimed at safeguarding Community financial interests. The rules provide for verification procedures as well as administrative measures and penalties to ensure against “irregular” transactions. These provisions complement efforts to harmonize Member State criminal penalties for fraud against Community financial interests under the Convention on the Protection of the European Communities’ Financial Interests, adopted by the Council on July 26, 1995.5Both of these measures, jointly proposed by the Commission in 1994,6 intend to increase the compatibility between criminal and administrative provisions aimed at guarding Community financial interests.

The Regulation broadly defines “irregularity” as any infringement of Community law resulting from an act or omission by an economic operator, which has, or would have, the effect of prejudicing the general budget of the Communities or budgets managed by them, either by reducing or losing revenue accruing from own resources collected directly on behalf of the Communities, or by an unjustified item of expenditure

(Article 1). The Regulation mandates the introduction of administrative checks, measures and penalties to the extent that they are required to ensure proper application of Community law. These rules and sanctions shall be “effective, proportionate and dissuasive” in order to provide adequate protection (Article 2(1)). Subject to applicable Community law, procedures for applying Community checks, measures and penalties are governed by the laws of the Member States (Article 2(4)). To harmonize widely divergent national limitation periods on proceedings and enforcement,7the Regulation establishes a general four year statute of limitations with respect to such administrative proceedings. This period is measured either from the time the irregularity is committed, or, in the case of “continuous or repeated irregularities,” from the day on which the irregularity ceases (Article 3(1)). Individual Member States may lengthen the limitations period (Article 3(3)).