The EPPO between Union law and national systems: Critical reflections on a hybrid enforcement model

Introduction

The establishment of the European Public Prosecutor’s Office (EPPO) was formalised through the adoption of Regulation (EU) 2017/1939 ¹ (hereinafter EPPO Regulation). The final version of the Regulation is the result of a four-year negotiation process, starting from the original 2013 proposal by the European Commission. ²

The Regulation simultaneously represents both a final goal and a starting point. On the one hand, it gives concrete form to years of legislative and extra-legislative debates, proposals and projects, all stemming from the European institutions’ perceived need to enhance the effectiveness and efficiency of the protection of the Community’s (and later the Union’s) financial interests. ³ On the other hand, it constitutes a starting point, as the Regulation’s content reflects the compromises reached during negotiations – compromises largely driven by Member States’ reluctance to cede substantial portions of sovereignty. The resulting legal framework has, in part, fallen short of expectations regarding the vertical integration of investigations in the field of offences affecting the Union’s financial interests. The European Commission has already launched a study phase in preparation for potential future proposals aimed at revising and strengthening the Regulation to make the functioning of the EPPO more satisfactory.

As summarised by the European legislator in Recital 12 of the EPPO Regulation, the rationale – indeed, the necessity – behind the establishment of the EPPO is rooted in a long-standing dissatisfaction with the pre-existing framework for protecting the Union’s financial interests. The fragmented approach of national judicial authorities failed to provide adequate protection for the Union’s financial resources, resulting in significant economic losses due to the unchecked dissipation of Union funds. Under the principle of subsidiarity, the Union legislator thus intervened, transferring competences in the field of investigation and prosecution of such offences to an independent European body.

Since the Treaty of Lisbon, the EPPO has found its legal basis in Article 86 of the Treaty on the Functioning of the European Union (TFEU), which, in turn, draws, with some variations, on Article III-274 of the 2004 Draft Treaty establishing a Constitution for Europe.

Article 86 TFEU sets out a legislative procedure for establishing the EPPO that is markedly intergovernmental in nature, relegating one of the two co-legislators – the European Parliament – to a secondary role, limited to approving the Regulation without actively participating in the negotiation phase. In this regard, leading scholars have aptly observed that ‘Article 86 TFEU is still rooted in a “third pillar mindset”’. ⁴

Due to this legal framework – which assigns the Council a primary role – the political will of the Member States to advance the EPPO project was crucial. However, during the negotiations, the clearest sign of reluctance from certain Member States was the failure to achieve unanimity within the Council, as required by Article 86(1) TFEU. As a result, the EPPO Regulation was adopted through enhanced cooperation, pursuant to Article 86(2) TFEU (a provision that was not present in Article III-274 of the 2004 Draft Treaty establishing a Constitution for Europe ⁵ ), which precisely anticipated the possibility of a lack of unanimity in the Council. The number of participating Member States has increased over time; recently, with the accession of Sweden and Poland, twenty-four Member States now participate in the EPPO.

This contribution aims to analyse some key issues within the EPPO’s legal framework. More specifically, it examines certain problematic aspects stemming from the necessary integration of the EPPO Regulation with national legal systems, since the Regulation is not self-sufficient – neither with regard to substantive criminal law nor procedural law.

In particular, the second section briefly analyses the EPPO’s material competence and whether the Italian legal system complies with the criminalisation obligations concerning the so-called ‘PIF offences’. The third section, taking Article 42(1) of the EPPO Regulation and its recent interpretation by the Court of Justice as a reference, assesses the compatibility with Union law of Italian rules on judicial (in a broad sense) review of EPPO competence during the investigations. Finally, the fourth section focuses on the issue of transnational investigations, considering the implications within the Italian system of the Court of Justice’s ruling on the preliminary reference concerning Article 31 of the EPPO Regulation.

Shaping the EPPO’s competence through the Regulation and the PIF Directive: The Italian Implementation in Perspective

Article 86(1), first subparagraph, of the TFEU states that the establishment of the EPPO is driven by the objective ‘to combat crimes affecting the financial interests of the Union’. This provision is consistent with the previous extra-legislative projects for the creation of a European Prosecutor’s Office, which had always been conceived first and foremost to make the protection of the financial interests of the European Union, which constitute a properly supranational legal asset, ⁶ more effective and efficient.

The EPPO Regulation, however, does not directly define the criminal offences for which the European Prosecutor’s Office is competent to investigate and prosecute. The possibility of defining such offences either within the EPPO Regulation itself or through a separate regulation adopted pursuant to Article 86 TFEU has long been debated. As has been observed by authoritative scholars, ‘Article 86 TFEU is phrased in an ambiguous way when it comes to the legal basis for harmonising the material scope of competence of the EPPO’. ⁷

In particular, ambiguity arises in paragraph 2 of Article 86 TFEU, which provides that the EPPO’s action shall primarily focus on ‘offences against the Union’s financial interests, as determined by the Regulation provided for in paragraph 1’. In both the English and Italian versions of the TFEU, it is unclear whether the Regulation is meant to define the offences or the concept of the ‘Union’s financial interests’, as the verb may refer to either term. The ambiguity is further compounded by the different translations of Article 86 TFEU into other official EU languages, leading to diametrically opposed interpretations. Scholars have highlighted, ⁸ for instance, that while the Spanish and French versions constrain the verb’s reference to the masculine noun (ie financial interests), the Portuguese version, by contrast, uses a feminine conjugation, which can only relate to the feminine noun (ie offences). This results in a lack of clarity and precision in Article 86 TFEU, which precludes attributing direct legislative power in criminal matters to the EU institutions. ⁹

In any event, Chapter IV of the EPPO Regulation, beginning with Article 22, delineates the EPPO’s competence by reference to other EU legislative instruments, in particular the so-called PIF Directive (Directive (EU) 2017/1371). Article 22(1) provides that ‘The EPPO shall be competent in respect of the criminal offences affecting the financial interests of the Union that are provided for in [the PIF] Directive, as implemented by national law’.

It is thus the Directive – by harmonising national legal systems and imposing obligations to criminalise certain types of conduct – that defines the offences falling within the EPPO’s jurisdiction. Article 22(1) of the EPPO Regulation constitutes a dynamic reference to the other legal instrument, since ‘if the PIF Directive changes in the future, any change would indirectly alter the competence of the EPPO’. ¹⁰ However, the dynamic referral effect appears to be reduced for Value-Added Tax (VAT) frauds, since, with reference to the latter, again Article 22(1) adds that for VAT frauds ‘the EPPO shall only be competent when the intentional acts or omissions [. . .] are connected with the territory of two or more Member States and involve a total damage of at least EUR 10 million’.

The PIF Directive was adopted on the basis of Article 83(2) TFEU. The legal basis for its adoption was, however, subject to significant and contentious debate during the legislative process. ¹¹ Indeed, the European Commission’s initial proposal identified Article 325 TFEU as the appropriate legal basis; nevertheless, the Council considered Article 83 TFEU to be more suitable: the legislator stated that this provision constitutes the specific legal basis for any measure that directly impacts criminal law; Article 325 TFEU remains applicable only in relation to measures of a non-criminal nature. ¹²

Nonetheless, this latter interpretation of the Treaties has not found broad support among scholars. Several commentators have argued – on various grounds – that the original legal basis proposed by the Commission was both correct and appropriate. It has been pointed out that Article 325 TFEU no longer reproduces the prohibition on adopting criminal law measures that had been contained in its predecessor, Article 280(4) EC Treaty. ¹³ Consequently, there is a reversal in the logic traditionally governing the relationship of lex specialis between Articles 83 and 325 TFEU: Article 83 constitutes the general legal basis for Union action in criminal matters, ¹⁴ whereas Article 325 provides an alternative legal foundation (with different conditions and procedural rules) for the EU legislator’s intervention in the protection of the Union’s financial interests.

However, ‘the issue of the Directive’s legal basis has not changed since then, not even after the Taricco case of the CJEU identified Article 325 TFEU as the key provision in the PIF sector’. ¹⁵

Article 3 of the PIF Directive criminalises a wide range of conduct that falls within the category of fraud against the Union’s financial interests.

A first distinction can be drawn between expenditure-related fraud – points (a) and (b) – and revenue-related fraud – points (c) and (d).

The former is further subdivided into non-procurement-related expenditure fraud – point (a) – and procurement-related expenditure fraud – point (b). The underlying material conduct constituting fraud is largely overlapping in both cases, encompassing (i) the use or presentation of false, incorrect or incomplete statements or documents; or (ii) the non-disclosure of information in violation of a specific obligation, which results in the misappropriation or wrongful retention of funds or assets and (iii) the misapplication of such funds or assets for purposes other than those for which they were originally granted.

Regarding revenue-related fraud, the Directive distinguishes between revenue arising from VAT own resources – point (d) – where a separate and specific offence is provided for: ‘the presentation of correct VAT-related statements for the purposes of fraudulently disguising the non-payment or wrongful creation of rights to VAT refunds’; and revenue other than VAT own resources – point (c).

By contrast, Article 4 of the PIF Directive concerns offences that may potentially harm the Union’s financial interests. ¹⁶ These refer to conduct that is not intrinsically detrimental to such interests, but whose harmfulness is nonetheless possible and, indeed, only eventual. Article 4, in fact, classifies as ‘PIF offences’ money laundering (which it does not define directly but refers to Directive (EU) 2015/849), active and passive corruption, and misappropriation. The latter has received a precise definition, since Article 4(3) qualifies ‘misappropriation’ as ‘the action of a public official who is directly or indirectly entrusted with the management of funds or assets to commit or disburse funds or appropriate or use assets contrary to the purpose for which they were intended in any way which damages the Union’s financial interests’.

During the legislative negotiations, the Council opposed the inclusion of VAT fraud in the PIF Directive, whereas both the European Commission and the European Parliament supported its inclusion. The latter institutions argued that VAT constitutes a non-negligible source of Union revenue and therefore falls within the scope of the Union’s financial interests deserving protection.

The deadlock over VAT fraud was ultimately resolved only following an intervention by the Court of Justice (albeit a very controversial one, for reasons not addressed here) in the Taricco case. ¹⁷ The ruling – which has been described by scholars as a decision with political contents ¹⁸ – constituted a condicio sine qua non for the continuation of negotiations on the proposed PIF Directive, including VAT fraud. Indeed, ‘the decision was primarily viewed as a means to an end, serving the Court’s goal to deliver a precise message to the Member States as parties in the negotiating process’. ¹⁹

Article 22(2) of the EPPO Regulation, to regulate an additional area of competence of the EPPO, refers to another legal instrument previously adopted before the entry into force of the Treaty of Lisbon. The EPPO is indeed competent ‘for offences regarding participation in a criminal organisation as defined in Framework Decision 2008/841/JHA, as implemented in national law, if the focus of the criminal activity of such a criminal organisation is to commit any of the’ ‘PIF offences’ falling within the scope of the PIF Directive.

Similarly, paragraph 3 of the same article extends the scope of the EPPO’s intervention, providing that it is also competent for all offences ‘inextricably linked’ to the ‘PIF offences’. Among scholars, this is often known as ‘ancillary competence’. However, this competence is not absolute: as established by Article 25(3), it may only be exercised if the ‘inextricably linked’ offence is less serious than the ‘PIF offence’, meaning that the latter is punishable under national law by a higher maximum penalty. An exception exists, however, in cases where the EPPO shall still exercise competence over the ‘inextricably linked’ offence ‘if the latter offence has been instrumental to commit the “PIF offence”’.

The only official guidance on the notion of ‘inextricably linked offences’ is provided in Recital 54 of the Regulation, according to which ‘the notion of “inextricably linked offences” should be considered in light of the relevant case-law which, for the application of the ne bis in idem principle, retains as a relevant criterion the identity of the material facts (or facts which are substantially the same), understood in the sense of the existence of a set of concrete circumstances which are inextricably linked together in time and space’.

Scholars have, however, raised concerns regarding the legitimacy of this provision, since ‘Article 86 TFEU does not explicitly confer powers on the EPPO to prosecute ancillary offences’, ²⁰ and because ‘the wide notion of “ancillary” competence endorsed by the EPPO Regulation is, however, difficult to align with a principled reading of Article 86 TFEU based on the idea of “transnational interests”’. ²¹

Finally, Article 22(4) of the EPPO Regulation is categorical in stating that ‘the EPPO shall not be competent for criminal offences in respect of national direct taxes including offences inextricably linked thereto’.

In the original proposal by the European Commission, the EPPO was intended to exercise exclusive competence. This feature has been described as ‘a strong supranational element’. ²² Arguably too strong for the Member States; indeed, during the negotiations, the exercise of competence was redefined, transitioning towards a model of shared competence: ‘the current EPPO Regulation has opted for this model of concurrent competence, with a right of evocation for the EPPO’. ²³ The clearest display of this model is undoubtedly the involvement of the EPPO, in VAT fraud cases, only where the damage exceeds ten million euros and the fraud presents a cross-border character. However, even with respect to other PIF offences for which the EPPO is competent under Article 22 of the EPPO Regulation, Article 25(2) provides that jurisdiction shall be exercised only if the damage caused to the financial interests of the Union exceeds 10,000 euros, unless the case has repercussions at Union level (a) or officials or other servants of the Union, or members of the institutions of the Union, are suspected of having committed the offence (b).

Italy transposed the PIF Directive through Legislative Decree No. 75 of 14 July 2020, which was followed by a corrective decree a couple of years later (Legislative Decree No. 156 of 4 October 2022). The Italian criminal system did not undergo a radical overhaul, as the legislative framework on ‘PIF offences’ was already largely developed; nonetheless, significant amendments were necessary.

Firstly, in cases where the criminal conduct harmonised by the Directive could already be subsumed under existing offences, but the applicable sanctions were insufficient, aggravating circumstances were introduced. This was particularly required where the conduct was punishable with imprisonment of up to three years. In compliance with the Union obligations laid down by the Directive, the introduced aggravating factors raised the maximum penalty to four years’ imprisonment. These new aggravating circumstances apply to conduct harmonised under the PIF Directive, especially those involving the unlawful receipt of funds by private individuals (Articles 316-ter and 319-quater of the Italian Criminal Code), where the conduct harms the financial interests of the Union and causes damage exceeding €100,000 – this being the threshold beyond which, pursuant to Article 7(3) of the PIF Directive, the damage or benefit ‘shall be presumed to be considerable’. Generally, offences committed by individuals performing public functions, given their greater criminal seriousness, were already subject to harsher penalties and required no adjustment.

Another important amendment concerned corporate criminal liability, governed in Italy by Legislative Decree No. 231 of 8 June 2001. To comply with Article 6 of the PIF Directive, the range of offences capable of triggering corporate liability was expanded. Article 25-quinquiesdecies of Legislative Decree No. 231/2001 was extended: it now includes the offences of false tax returns, omitted tax returns and undue compensation (all provided for in Legislative Decree No. 74 of 10 March 2000), when committed in the context of cross-border fraudulent schemes aimed at evading VAT for an amount not less than ten million euros.

More recently, however, the 2024 mini-reform on offences against the public administration has raised new concerns regarding compliance with the PIF Directive’s criminalisation requirements. This issue has been analysed by Italian scholars who presented their remarks to the national legislator. ²⁴

A systematic premise is necessary. The offence of embezzlement, provided for by Article 314 of the Criminal Code, since a 1990 reform, punishes only the unlawful appropriation of money or movable property by individuals holding public functions. Conversely, the misuse of such resources for purposes other than those legally authorised used to fall (rectius: fell) within the offence of abuse of functions (‘abuso d’ufficio’) under Article 323 of the Criminal Code, a provision known among practitioners and scholars for its convoluted wording and burdensome evidentiary requirements for public prosecutors.

With the mini-reform, the legislator repealed Article 323 of the Criminal Code but simultaneously introduced Article 314-bis of the Criminal Code, which defines a new offence punishing public officials who use money or other movable property for a purpose other than that prescribed by law or by acts having the force of law.

The aforementioned scholars, through a series of critical remarks, subtly pointed out to a somewhat schizophrenic legislator that the sanctions were not compliant with the obligations arising from the PIF Directive. Indeed, Article 314-bis initially provided for a maximum penalty of three-year imprisonment. The legislator later intervened – via emergency legislation – to remedy the oversight and avoid breaching the criminalisation obligations, by introducing into Article 314-bis the same aggravating circumstance already provided in other offences: this increases the maximum penalty to four-year imprisonment for offences that harm the European Union’s financial interests with damage exceeding €100,000.

The abolition of the offence of ‘abuso d’ufficio’, although it does not currently expose Italy to infringement procedures for failure to comply with the criminalisation obligations under the PIF Directive, may in the future necessitate its reintroduction – potentially creating a certain degree of political embarrassment if the ruling majority includes those who advocated for the repeal of Article 323 of the Criminal Code. Indeed, the European Commission’s proposal for a new Anti-Corruption Directive, presented in May 2023, ²⁵ explicitly calls for the criminalisation of the offence of abuse of functions when committed intentionally. Article 11 of the above-mentioned proposal describes the conduct as ‘the performance of or failure to perform an act, in violation of laws, by a public official in the exercise of his functions for the purpose of obtaining an undue advantage for that official or for a third party’.

These events highlight the necessity for national legislators to maintain constant vigilance in reforming domestic legislation to ensure compliance with the criminalisation obligations set by the PIF Directive. A superficial and short-sighted approach to an ever-evolving normative framework risks creating inconsistencies with European requirements, compromising the uniformity of the EPPO legal framework and exposing Member States to infringement proceedings.

The (lack of) Italian compliance with Article 42 of the EPPO Regulation following the I.R.O. e.a. judgement: Assessing EPPO’s competence in ongoing investigations

A particularly relevant issue concerning the interaction between the EPPO Regulation and national implementing law is the resolution of conflicts of competence between the EPPO and national prosecuting authorities. Article 25(6) of the Regulation states that ‘the national authorities competent to decide on the attribution of competences concerning prosecution at national level shall decide who is to be competent for the investigation of the case’. Therefore, the EU legislator entrusted Member States with the task of designating the national authority responsible for settling conflicts of competence.

The topic of the resolution of conflicts between national investigating authorities and the EPPO is closely linked to ensuring compliance with the limits of the latter’s competence, as defined by the EPPO Regulation and the PIF Directive, not only in the interest of the national sovereignty, as will be discussed. As noted by scholars, ‘the choice of the EU legislature to establish the competence of the EPPO as shared competence between the EPPO and national authorities [. . .] puts the burden of the challenging assessment of whether the conditions for exercising the EPPO’s jurisdiction laid down in Article 25 of the EPPO Regulation are met in the concrete case’. ²⁶

The Italian legislation on the matter, along with its initial applications, must be examined through a specific lens: Article 42 of the EPPO Regulation. This provision lays down the right to judicial review of procedural acts carried out by the EPPO and was recently interpreted by the Court of Justice in the preliminary ruling in Case C-292/23.

Article 42 of the EPPO Regulation in paragraph 1 assigns jurisdiction to the courts of the Member States to review ‘procedural acts of the EPPO that are intended to produce legal effects vis-à-vis third parties’.

It has been argued in this regard that the Regulation introduces ‘a sort of legal escamotage’ ²⁷ : since the EPPO is a body of the Union, all its acts should be subject to the control of the CJEU pursuant to Article 263 TFEU. However, EPPO is ‘exclusivement aux fins du contrôle juridictionnel des actes [. . .] qualifié d’autorité nationale’. ²⁸ Nonetheless, the subsequent paragraphs of Article 42 of the EPPO Regulation define the scope of competence of the Court of Justice of the European Union. ²⁹

It is then necessary to focus on the provisions of Legislative Decree No. 9 of 2 February 2021, which serves as the legislative instrument adapting the Italian legal framework to the provisions of the EPPO Regulation. ³⁰

Article 9 of Legislative Decree No. 9 of 2021 states that European Delegated Prosecutors exercise the functions and powers attributed to national public prosecutors (paragraph 1), and that prosecutorial functions are to be exercised throughout the entire national territory, regardless of the place of assignment (paragraph 2).

Moreover, Article 16 of the same Legislative Decree identifies the Prosecutor General at the Court of Cassation as the authority competent to resolve conflicts of competence between the EPPO and national public prosecutors. As regards the procedural provisions applicable to the resolution of such conflicts, the decree refers to the provisions of the Italian Code of Criminal Procedure, simultaneously introducing a compatibility clause. Specifically, the provisions referred to are Articles 54, 54-bis, 54-ter and 54-quater of the Criminal Procedure Code.

The fundamental choice made in this regard has given rise to many concerns ever since the adoption of the EPPO Regulation, particularly with respect to the consequences of assigning the power to resolve conflicts of jurisdiction to an authority that is not strictly judicial in nature – as is the case in the Italian legal system, where, as noted, this competence lies with the Prosecutor General at the Court of Cassation. It has been pointed out that, according to the settled case law of the Court of Justice, ‘if the competent national authority is the prosecution service, the eligibility criteria of Article 267 TFEU for requesting a preliminary ruling are not met’. ³¹

However, it is precisely from the Article 54-quater of the Code that the analysis must continue. In purely domestic cases not involving the EPPO, this provision allows the suspect, the injured party/victim and their legal counsel, during the preliminary investigations, to request the transmission of the case file to the public prosecutor before the court that they believe to have jurisdiction, if they consider that the offence falls within the competence of a judge other than the one under whose jurisdiction the acting prosecutor is operating.

However, in light of its wording (despite the explicit reference made in Article 16 of Legislative Decree No. 9 of 2021), the provision does not appear to be particularly suitable in cases involving conflicts of competence with the EPPO ³² – whose office is unified across the entire national territory – as it is designed to be activated in cases where a lack of territorial jurisdiction or a connection with another offence is alleged.

Precisely for this reason, Article 54-quater of the Criminal Procedure Code was declared essentially inapplicable by the Prosecutor General in decrees No. 553/23 and No. 556/23. As a result, the requests submitted basis on that provision were deemed inadmissible, since ‘it cannot be invoked where the functional competence of the acting public prosecutor is challenged, as in the present case, where the very grounds for the competence of the European Public Prosecutor’s Office are being disputed’ (translation of the author). ³³

According to the Prosecutor General, such an interpretation would blur the distinction between two separate domains: the relationships between judicial authorities – within which it is possible to raise objections regarding functional jurisdiction – and the relationships between different offices of the public prosecution service, where such objections are not admissible.

In essence, therefore, under Italian law, parties other than national prosecutors – particularly suspects – cannot challenge the lack of competence of the EPPO through a form of judicial review. Local Italian courts have also affirmed that only national prosecutors can challenge the competence of the EPPO, because it is a matter that concerns internal relations between prosecutorial authorities, if it does not affect the competence of the judge. ³⁴

This issue arises within a broader context in which the Italian judicial authorities – first and foremost the Court of Cassation – have offered an interpretation of the limits of the EPPO’s competence that is far from strict.

There are, in particular, two rulings by the Court of Cassation concerning cross-border VAT fraud cases which illustrate this trend. ³⁵ In both cases, the suspects challenged the validity of the precautionary measures imposed on them, arguing that the original requests made by the Italian European Delegated Prosecutors – who had previously taken over the investigations – were invalid. The suspects claimed that the EPPO lacked competence because the requirement of transnationality for the fraud was not met.

While the Court of Cassation was undoubtedly correct in rejecting the nullity claims – insofar as European Delegated Prosecutors derive their legitimacy, first, from Article 13 of the EPPO Regulation, which grants them the same powers as national prosecutors in relation to investigations, prosecutions and bringing cases to judgement, in addition to the specific powers conferred by the Regulation itself, and second, from Article 9(1) of Legislative Decree No. 9 of 2021, which, as already seen, states that they exercise the functions and powers of national public prosecutors – the reasoning becomes less convincing where the Court affirms, in general terms, that the EPPO may take over an investigation whenever this would enhance the effectiveness of the investigative action. The Court also asserts that such a possibility is provided for in Article 25(4) of the EPPO Regulation.

However, this latter provision allows the EPPO to assume responsibility for an investigation, with the consent of the national authorities, only in a narrowly defined and exceptional scenario – not in the broad and generic terms suggested by the Court. Article 25(4) of the EPPO Regulation indeed states that EPPO may exercise its competence ‘if it appears that [it] is better placed to investigate or prosecute’, but only when ‘there is a reason to assume that the damage caused or likely to be caused to the Union’s financial interests by an offence as referred to in Article 22 does not exceed the damage caused, or likely to be caused to another victim’. This is a situation in which the EPPO would normally refrain from exercising its competence, as provided under Article 25(3)(b) of the same Regulation. ³⁶

It is risky to legitimise, in a superficial and dogmatic manner, the exercise of competence beyond the limits established by the EPPO Regulation, without duly considering that the conduct of proceedings by the EPPO may entail a restriction of the safeguards of suspects, in light of certain procedural differences. This is particularly evident in the context of cross-border investigative measures, as procedural rules diverge depending on whether the investigative act is carried out by European Delegated Prosecutors under Article 31 of the EPPO Regulation, or by national judicial authorities on the basis of the common instruments of judicial cooperation.

The most striking difference, as will be seen in the next paragraph, concerns the absence of grounds of refusal. Article 31 of the EPPO Regulation, which governs the system of mutual assistance among European Delegated Prosecutors (EDPs) in cross-border investigations through the assignment of investigative measures, does not provide for any discretion to refuse compliance on the part of the assisting EDP, who shall undertake the assigned measure ³⁷ ; any disagreements are resolved through internal consultation procedures within the EPPO. ³⁸

The ‘light-touch’ interpretation of the EPPO Regulation adopted by the Italian Court of Cassation reflects an approach that views the provisions on the EPPO’s competence – as set out in Regulation 2017/1939 and Directive 2017/1371 (the ‘PIF Directive’) – as rules aimed solely at protecting state sovereignty, while failing to consider the way in which the legal position of private individuals may also be affected.

The issue, taken as a whole, raises the question of whether the impossibility – under Italian law – for individuals other than national prosecution offices to obtain an effective judicial review of the EPPO’s competence during the investigations complies with the obligations deriving from Article 42 of the EPPO Regulation and with Article 47 of the Charter of Fundamental Rights of the European Union.

Article 42 of the EPPO Regulation was recently interpreted by the Court of Justice in its ruling in case C-292/23. ³⁹ The case originated from a request for a preliminary ruling submitted by a Spanish court, the Juzgado Central de Instrucción No 6 de Madrid, which questioned whether national legislation that does not allow for judicial review of a summons issued by the EPPO – requiring a person to appear as a witness – was compatible with EU law, and more specifically with the obligation, under Article 42 of the EPPO Regulation, to provide a judicial remedy against procedural acts adopted by the EPPO that produce legal effects vis-à-vis third parties.

Beyond the specificities of the case – on which it is not necessary to dwell here – the judgement provides a fundamental interpretation of Article 42 of the EPPO Regulation. Starting from the text of the provision itself, the Court of Justice focused on the scope and purpose of Article 42, offering interpretive guidance that extends beyond the particular matter before it.

Article 42 of the EPPO Regulation, as already mentioned before, in a manner that is both novel and unique within the EU legal order, introduces a sort of jurisdictional division over judicial review of procedural acts adopted by the EPPO – an EU body – between national courts and the Court of Justice of the European Union.

Paragraph 1 of Article 42 entrusts national judicial authorities with the review of EPPO procedural acts intended to produce legal effects vis-à-vis third parties, in accordance with the procedures and conditions laid down by national law.

On this point, the Court of Justice emphasised that the reference to national law is partial. While it certainly concerns the procedural modalities through which Member States structure judicial review, ⁴⁰ the concept of ‘procedural acts of the EPPO intended to produce legal effects vis-à-vis third parties’ requires an autonomous and uniform interpretation across the Union. ⁴¹

It is therefore necessary, first and foremost, to determine what constitutes a procedural act. Drawing also from Recital 87 of the Regulation, the Court stated that such acts are ‘those acts undertaken by the EPPO in the course of its investigations’. ⁴²

Having clarified this, one must then define what is meant by ‘effects vis-à-vis third parties’ produced by a procedural act. On this point, the Court noted that the wording used in Article 42(1) of the EPPO Regulation mirrors that of Article 263 TFEU, which establishes the CJEU’s jurisdiction over actions for annulment. Referring to its own case law on Article 263 TFEU and transposing its rationale to the interpretation of Article 42 EPPO Regulation – based on the common underlying principle of standing for judicial review – the Luxembourg judges held that the act must produce ‘legal effects which are binding on, and capable of affecting the interests of, a natural or legal person by bringing about a distinct change in their legal position’. ⁴³

The Court further stressed that ‘in order to determine, in a given case, whether the contested act is intended to produce binding legal effects, it is necessary to examine the substance of the act and to assess its effects in the light of objective criteria, such as the content of the act in question, taking into account, as appropriate, the context in which it was adopted and the powers of the EU institution, body, office or agency which adopted it’. ⁴⁴

Lastly, the Court addressed the respect for and protection of certain principles that are intrinsic to the system of judicial remedies. It recalled, first of all, that the Regulation does not interfere with the principle of procedural autonomy of the Member States. Thus, while Member States are bound to ensure the right to effective judicial protection under Article 42 of the EPPO Regulation, they remain free to determine the procedural modalities of such remedies. The principle of effectiveness does not, therefore, require Member States to provide a direct remedy against every procedural act of the EPPO; effective protection may also be ensured through incidental judicial review by the trial court. ⁴⁵ Nonetheless, in accordance with the principle of equivalence, the remedies made available must not be less favourable than those provided in purely domestic matters. ⁴⁶

How do the principles set out by the Court of Justice in the I.R.O. e.a. judgement become relevant in the context of reviewing the competence of the EPPO? Let us attempt to follow the same line of reasoning as the Court.

Is the act initiating an investigation by the EPPO – or, alternatively, the act by which it exercises its right of evocation of a case from national authorities – a procedural act? Certainly, yes, since it constitutes the very act by which the EPPO begins to conduct its investigations.

Secondly, is it an act that produces effects vis-à-vis third parties, pursuant to Article 42 of the EPPO Regulation? Again, the answer must be in the affirmative, because, as previously argued, it is not irrelevant for the legal position of ‘third parties’, and in particular for suspects, whether the authority conducting the investigation is a national prosecutor or the EPPO. It can therefore be asserted that such acts produce binding legal effects that affect the interests of a natural or legal person by bringing about a distinct change in their legal position.

It follows that the absence, in the Italian legal system, of a legal remedy allowing for the review of the allocation of competences between the EPPO and national prosecution offices – upon request by third parties – is in conflict with Article 42 of the EPPO Regulation, as well as with Article 47 of the Charter of Fundamental Rights of the European Union.

Moreover, still following the principles laid down in the I.R.O. e.a. judgement, one might ask whether there is a need to provide for a direct legal remedy, similar to the one already provided for under Article 54-quater of the Italian Criminal Procedure Code, or whether an incidental review by the trial judge may suffice. However, such a review would take place at a much later stage of the proceedings – one in which there are no longer procedural differences with a purely domestic case, as the conduct of the trial follows the same rules set out in the Code of Criminal Procedure. Therefore, a direct legal remedy is required during the preliminary investigation phase, which is the stage at which the differences in procedural regimes are most significant.

The G.K. e.a. judgement on Article 31 EPPO Regulations and possible future scenarios for the Italian system

As is well known, the EPPO Regulation establishes a system of cooperation among the European Delegated Prosecutors, which applies when they are required to carry out transnational investigative measures – namely, in cases where the European Prosecutor handling the case needs to execute an investigative act in one or more Member States other than their own.

The original 2013 Commission Proposal for a Regulation conceived the EPPO as ‘a single office operating in a single legal area’. This formulation was more symbolic than normatively effective, as that legislative draft still placed considerable reliance on national legal systems. However, in the final version of the Regulation, there are no references to a ‘single legal area’, since they were removed during the negotiations within the Council. ⁴⁷

It was precisely during this latter phase of the legislative process that the negotiators started feeling the need to clearly define the rules governing the functioning of transnational investigations – primarily due to structural changes made to the institutional organisation of the EPPO. The initial proposal on the subject of transnational investigations dates back to the Italian Presidency and, although substantial modifications were made to the procedural framework, the underlying idea that transnational investigations required specific regulation was retained through to the adoption of the final text. ⁴⁸

During the negotiations, the idea was also put forward to refer to Directive (EU) 2014/41 on the European Investigation Order, an instrument expressly and unambiguously based on the principle of mutual recognition. After all, a similar reference is made to Framework Decision 2002/584 on the European Arrest Warrant by Article 33 of the EPPO Regulation, entitled ‘Pre-trial arrest and cross-border surrender’. However, ‘an alignment of the EPPO provision with those of the EIO was rejected in favour of a sui generis regime for the EPPO. Relying on mutual recognition was rightly considered as completely deviating from the idea that the EPPO is a single European body acting across EU Member States’. ⁴⁹

Article 31 of the EPPO Regulation provides for the assignment by the handling EDP of the investigative measure to the assisting EDP of the Member State in which the measure is to be carried out. ⁵⁰ It is expressly stipulated that the justification and the adoption of such measures are governed by the law of the Member State of the handling EDP. ⁵¹ Conversely, the execution of the assigned measures must comply with the law of the Member State of the assisting EDP. However, the formalities and procedures explicitly indicated by the handling EDP must also be observed – unless they conflict with the fundamental principles of the legal system of the assisting EDP’s Member State. ⁵²

The most striking differences compared to the European Investigation Order concern the absence of grounds for refusal by the assisting EDP to execute the measure. It has rightly been observed that ‘a request or an order will no longer be sent, but rather the handling EDP will simply assign the investigative measure. The “assignment” is not subject to any type of recognition procedure nor subject to conditions. Intentionally, the term “recognition” is ignored’. ⁵³

Equally distinctive is the procedure established for cases of disagreement concerning the investigative measure for which assistance is requested. In such instances, an internal consultation between the European Delegated Prosecutors is envisaged, which may ultimately involve the competent Permanent Chamber. ⁵⁴

However, one of the most problematic topics since the outset has certainly been the question of judicial authorisation or review of investigative measures to be carried out in transnational investigations. The Regulation, through broad reference to national rules, focuses on the judicial authorisation required to undertake the investigative measure and states that, if such authorisation is required under the law of the assisting EDP’s Member State, it shall be obtained in accordance with the law of that State. ⁵⁵ However, it remains unclear in principle how extensive the powers of the judge are. Conversely, when the authorisation is required by the law of the handling EDP’s Member State, it is the handling EDP who obtains it and transmits it to the assisting EDP along with the assignment. ⁵⁶

The Regulation is rather terse with regard to situations in which judicial authorisation is required under both national legal systems. Only Recital 72 provides some guidance, stating that ‘In cross-border cases, the handling European Delegated Prosecutor should be able to rely on assisting European Delegated Prosecutors when measures need to be undertaken in other Member States. Where judicial authorisation is required for such a measure, it should be clearly specified in which Member State the authorisation should be obtained, but in any case there should be only one authorisation’.

Furthermore, the Regulation does not set out any provisions concerning subsequent judicial review, since there is no indication as to the powers of the judge in the Member State of the assisting EDP when an appeal is brought against the execution of a transnational investigative measure.

It is precisely on these issues that the Court of Justice has intervened, following a request for a preliminary ruling concerning Article 31 and Article 32 of the EPPO Regulation. ⁵⁷ The interpretative solution provided by the Court, the reasoning on which it is based, and the conclusions of the Advocate General all reveal that – despite the Regulation’s surgical attempt to avoid any reference to mutual recognition – ‘the logic of mutual recognition does not seem to have been completely left behind’ ⁵⁸ within the EPPO’s system of transnational investigations, highlighting more than one common feature with the provisions governing the European Investigation Order.

The case originated from investigations carried out by the German European Delegated Prosecutors into a transnational fraud, which led to the activation of the cooperation mechanism under Article 31 of the EPPO Regulation. This resulted in the assignment of searches and seizures to the Austrian European Delegated Prosecutors, to be carried out within the Austrian legal system.

A crucial element in the case was the implementing legislation adopted in both countries, which reflected a shared interpretation of Article 31(3) of the EPPO Regulation and of Recital 72, aiming to uphold the principle of a single judicial authorisation. Indeed, Paragraph 3(2) of the German Law implementing the EPPO Regulation stated that ‘Where the provisions of the Code of Criminal Procedure provide for the order or confirmation of a judge for an investigative duty, such an order or confirmation shall be obtained from a German judge for cross-border measures to be enforced in another Member State participating in the establishment of the EPPO, in accordance with Article 31(3), only if the law of the other Member State does not require such an order or confirmation by a judge’. Based on this provision, the judge or court of the latter State is entrusted with a full review of the requested investigative measure(s).

Eventually, the Austrian judge authorised the searches and seizures; however, according to the suspects, ‘the judicial control carried out in the assisting EDP’s Country would not be sufficient, because it did not adequately justify the necessity of the investigative measure to be undertaken nor did it ensure effective compliance with the principle of proportionality’. ⁵⁹

The Oberlandesgericht Wien, the competent appellate court, submitted a request for a preliminary ruling to the Court of Justice, seeking clarification on the scope of its judicial powers – specifically, whether such review could extend to substantive aspects of the investigative measure, including its necessity and proportionality, or whether it should be limited to a mere procedural check.

During the hearing, two opposing interpretations were put forward, each advocating for a different interpretative model.

The first, supported by the German and Austrian governments, emphasised the principle of a single judicial review and considered that a full judicial control could be exercised by the judge of the assisting EDP’s Member State.

According to the second interpretative approach – also endorsed by the European Commission and the EPPO – two separate judicial authorisations are necessary: ‘one sought by the handling EDP addressing the substantive issues and the other sought by the assisting EDP focusing only on the formal issues’ ⁶⁰ . As noted, this reflects a transposition ‘into the EPPO system [of] a model close to that provided for in the European Investigation Order Directive’. ⁶¹

In the guidelines previously adopted by the College through Decision No. 6 of 2022, issued with the aim of guiding the activity of the European Delegated Prosecutors, the EPPO had already expressed its position on the matter, aligning itself with the argument advanced during the hearing. It stated that ‘the principle enshrined in Article 31(2) of the EPPO Regulation – the justification and adoption of the measures is governed by the law of the Member State of the handling European Delegated Prosecutor (EDP) – mirrors the principle that the substantive reasons and conditions for adopting any intra-EU cross-border measures are governed by the law of the issuing Member State, and can be challenged only in that Member State, [which] should be considered part of the acquis communautaire and has to be interpreted as a principle that governs the application of the whole Article 31 of the EPPO Regulation’. ⁶²

On the legal issue at stake, Advocate General Ćapeta took a very clear position in her Opinion, stating that ‘as long as there are no common EU criminal law rules, the EPPO cannot but operate based on mutual recognition. However, the levels of mutual recognition differ, and the EPPO may be seen as the most developed mutual recognition instrument in the area of cooperation in criminal matters yet’. ⁶³ The Advocate General therefore firmly supported the second interpretative option, while nonetheless sharing the concerns expressed by the proponents of the first view regarding the lack of clarity in the legislative text.

The judgement of the CJEU was described as a ‘Solomon’s verdict’. ⁶⁴ On the one hand, the Court endorsed the interpretation of the Regulation proposed by the Advocate General, holding that ‘the review conducted in the Member State of the assisting European Delegated Prosecutor, where an assigned investigation measure requires judicial authorisation in accordance with the law of that Member State, may relate only to matters concerning the enforcement of that measure, to the exclusion of matters concerning the justification and adoption of that measure’. ⁶⁵

However, in its reasoning, the Court adopted a cautious tone and refrained from explicitly stating that the system of transnational investigations conducted by the EPPO is based on mutual recognition. On the contrary, the Court kept its foot on the brake and, in more ambiguous terms, merely stated that Articles 31 and 32 of the EPPO Regulation establish a context of cooperation in which ‘the distinction drawn [. . .] between the justification and adoption of an assigned investigation measure, on the one hand, and its enforcement, on the other, reflects the logic underlying the system of judicial cooperation in criminal matters between the Member States, which is based on the principles of mutual trust and mutual recognition’. ⁶⁶

The compromise nature of the judgement is further evidenced by certain clarifications made by the Court which – in some respects – appear rather imaginative, as they are entirely unmoored from any express provision of the EPPO Regulation.

As scholars have highlighted, ‘the Court did [. . .] feel that the ex post judicial review of the legality and the necessity of the investigative measure provided for in Art. 42(1) EPPO Regulation would give suspects and other persons negatively affected by the investigative measure of the EPPO insufficient protection’. ⁶⁷

On this basis, the Court ruled that the division of competences between the judge of the handling EDP’s Member State and that of the assisting EDP’s Member State cannot undermine the fundamental rights of individuals affected by the execution of the measure, primarily the suspects. Therefore, ‘as regards investigation measures which seriously interfere with those fundamental rights, such as searches of private homes, conservatory measures relating to personal property and asset freezing, which are referred to in Article 30(1)(a) and (d) of Regulation 2017/1939, it is for the Member State of the handling European Delegated Prosecutor to provide, in national law, for adequate and sufficient safeguards, such as a prior judicial review, in order to ensure the legality and necessity of such measures’ ⁶⁸ (emphasis added by the author). The Court’s wording, as initially formulated, seems almost to amount to a suggestion among various possible forms of protecting the rights of the individuals concerned. In reality, however, a few paragraphs later – with an ambiguous shift in tone – the Court adopts much stronger language, stating that measures which seriously interfere with the rights of the person concerned, as guaranteed by the Charter, ‘must be subject to prior judicial review’ ⁶⁹ (italic added by the author).

This part of the judgement has been described as a form of indirect harmonisation. ⁷⁰ What is particularly noteworthy in this regard is that the original 2013 Proposal by the European Commission included a provision of similar content – Article 26(4) – which aimed at a (more incisive, albeit still minimal) approximation of national legal systems, requiring prior judicial authorisation for a number of investigative measures that the same Article 26 made available to the European Delegated Prosecutors. ⁷¹ Among those measures were searches and seizures, which were thus subject to judicial authorisation before being carried out. It is therefore evident that the idea that a certain degree of harmonisation of national procedures is necessary to regulate the functioning of investigations conducted by the EPPO has either been reconsidered or perhaps never truly abandoned. ⁷²

However, it shall be noticed that the Court of Justice, in seeking to strike a balance between the need to ensure the swiftness, expediency and efficiency of the EPPO’s cross-border investigations and the opposing need to safeguard the fundamental rights of the individuals concerned (as enshrined in the Charter), has developed an approach that appears even more protective than the one endorsed by the European Court of Human Rights. The latter, in fact, has held that ‘l’absence d’un contrôle judiciaire ex ante peut être contrecarrée par la réalisation d’un contrôle judiciaire ex post facto sur la légalité et la nécessité de la mesure’. ⁷³

What are the implications of the G.K. e.a. judgement for the Italian legal system?

Immediately after the Court of Justice’s ruling, many Italian scholars pointed out the compatibility issues of the Italian legal framework concerning searches and seizures for evidentiary purposes ⁷⁴ . Indeed, under the rules set out in the Italian Criminal Procedure Code, the public prosecutor may authorise a search and seizure; thus, there is no prior judicial review, as conceived by the Court of Justice.

This is not an unprecedented scenario, as several notable and recent precedents have shown similar issues.

Following the H.K./Prokuratuur judgement of 2021 ⁷⁵ (which did not concern the Italian legal system directly), a comparable incompatibility emerged. On that occasion, the Court of Justice held that public prosecutors could not be designated by national law as the competent authorities to authorise access to traffic and location data for a criminal investigation. Such access, it added, must be limited to procedures aimed at combating serious crime or preventing serious threats to public security. In response, the Italian legislator amended the Article 132 of the Legislative Decree No. 196 of 30 June 2003 (the so-called Privacy Code), introducing, as a general requirement, a threshold of seriousness of the offence, through a reference to a statutory maximum penalty of at least three years of imprisonment; in addition, it required the existence of sufficient grounds to suspect the commission of such offences and, most importantly, it required an ex ante authorisation by a judge through a reasoned decree.

Likewise, in the Brazzi v Italy judgement, already mentioned, the European Court of Human Rights condemned the Italian system in relation to evidentiary searches and seizures. The Court found that there was no remedy available to the individual concerned to obtain ex post judicial review of the necessity and lawfulness of the search alone. In fact, the remedy of ‘riesame’ (under Article 257 of the Criminal Procedure Code) could only be triggered if the search was followed by a seizure, which did not occur in the case at hand, as no items were found or seized. Following the conviction, the Italian legislator intervened in 2022 by introducing Article 252-bis of the Criminal Procedure Code, establishing a new remedy: opposition to the search decree issued by the public prosecutor, specifically applicable in cases of searches not followed by evidentiary seizures.

After those judgements, the legislator – surprisingly swiftly – intervened by introducing legislative amendments aimed at bringing the Italian legal system into compliance with the principles affirmed by the two European courts. It is likely that a similar intervention will be necessary following the judgement in G.K. e.a.

However, certain pitfalls must be avoided. Scholars have highlighted that, should a national legislative reform be limited exclusively to cross-border investigations conducted by the EPPO, by requiring that only Italian European Delegated Prosecutors obtain prior authorisation from the judge for preliminary investigations when assigning searches and seizures, broader distortions could arise. First, a differentiated regime would emerge in comparison to purely domestic cases (ie both proceedings falling outside the EPPO’s competence and proceedings involving offences within the EPPO’s remit where investigative measures are not assigned under Article 31 of the EPPO Regulation). ⁷⁶ Second, there would be the paradoxical risk of making the assignment of an investigative measure under Article 31 of the EPPO Regulation more cumbersome than the issuance of a European Investigation Order, for which no prior judicial review would be necessary – thereby reintroducing, through the back door, the very risk that the G.K. e.a. judgement had sought to eliminate. ⁷⁷

It would therefore be more desirable for the legislator to undertake a broader reform, reconsidering the powers of the public prosecutors to issue search and seizure orders, by introducing a requirement for prior judicial authorisation, similarly to what occurred following the H.K./Prokuratuur judgement.

Concluding remarks

The issues discussed in this contribution demonstrate that the process of integration between the EPPO Regulation and national legal systems is far from complete.

Some concerns, already highlighted by commentators at the time of the Regulation’s adoption, have been (temporarily) resolved. This is the case of the legal framework governing transnational investigations, which has been the subject of a clarifying interpretation by the Court of Justice in the G.K. e.a. judgement: it is now clearer what the extension of the powers of judges and courts is in the ‘handling’ and in the ‘executing’ State. However, by emphasising the need to clearly define the right to prior judicial review of the grounds for investigative measures requested under Article 31 of the EPPO Regulation, the Court has simultaneously opened new scenarios that will require further attention, not only from national legislators but also from the European one.

Of particular relevance (but also assistance to judicial practitioners) is the Court of Justice’s interpretation of Article 42(1) of the EPPO Regulation, which provides a Union law-oriented reading of the notion of procedural acts of the EPPO that are intended to produce legal effects vis-à-vis third parties. Nonetheless, it has been shown that the legal framework still presents grey areas that do not ensure full compliance with the above-mentioned Article 42(1) and with the rights enshrined in the Article 47 of the Charter of Fundamental Rights of the European Union. This is especially true in the Italian system in relation to the rules governing conflicts between national prosecuting authorities and the EPPO, where it is not possible for natural or legal persons to obtain a judicial review of the EPPO’s competence, pursuant to Article 42(1) of the Regulation.

Furthermore, the continued relevance of compliance with the criminalisation obligations outlined in the PIF Directive has been highlighted. The Directive, by contributing to the definition of the EPPO’s material competence, is part of the interaction between EU law and national legal systems. This interaction helps shape the legal framework of the EPPO and ensures uniformity in the definition of ‘PIF offences’. However, it has been shown how fragile the compliance with these obligations might be.

How does all this materially affect the EPPO’s actual performance? At present, it is difficult to offer a definitive answer. The annual reports published by the EPPO on its official website portray a Prosecutor’s Office that is highly active in pursuing offences against the financial interests of the Union. Notably, the data show that VAT fraud cases absorb a significant share of the EPPO’s work, both in terms of the number of ongoing investigations and their financial volume. However, such data – at the time of writing – do not yet reflect a high number of final convictions against alleged perpetrators of PIF offences (both suspects and defendants). Therefore, while the available figures may be read with cautious optimism, only in the coming years – following a sufficient number of completed trials – will it be possible to fully assess the scope and effectiveness of the EPPO’s work and its legal framework.