EU lawyers tell governments they can contest Panama committee’s legality

EU member states have been advised by the Council of Ministers’ legal service to coordinate a “unified approach” before any minister gets summoned to testify before the European Parliament’s committee to investigate the Panama Papers, and that governments could contest the legality of the EP decision to set up the committee.

The Council – which comprises the EU’s heads of government – was told by its legal service that member states could be in a position to refuse participation in the Panama Papers committee, putting into doubt the EP committee’s prerogative to summon ministers.

It said MEPs could not assume themselves the power of the European Commission by asking member states on how they have enforced taxation rules, unless they had clear allegations of contraventions or proof of maladministration.

The 65-member committee seeks to investigate alleged contraventions and maladministration in the application by the European Commission or member states of EU laws on money laundering, tax avoidance and tax evasion.

Malta’s former energy minister Konrad Mizzi could be one of those government members told to testify before the committee of inquiry.

The legal remarks were prepared by the Council’s legal service to guide member states on any matters relating to the European Parliament’s committee of inquiry, which will consider summoning EU ministers to testify on the Panama Papers revelations.

In their conclusions, the legal service told EU governments that the Panama Papers committee did not “specify with a sufficient level of precision” what the facts of the inquiry are, or which EU laws have been contravened or administered wrongfully.

“The unspecific and generic character of the facts on which the EP decision is based does not allow neither the Member States nor the Council to assess their obligation to participate in the works of the committee of inquiry,” the legal service said.

The legal service argued that member states must be clearly shown what the inquiry’s factual and legal elements are, so that they can determine whether they are even obliged to participate. “Were this not the case, Member States and the Council may validly refuse participation so that their rights and interests are preserved.”

The legal service further added that the committee risked altering the balance that allows the Council the sole power to harmonise taxation laws.

“By seeking to exercise a general and unqualified control over the manner in which Member States apply their national laws and regulations to combat tax evasion, the active role which the EP assigns itself by setting up this committee of inquiry with a very wide mandate extends the current powers of the Union in the field of taxation, encroaching thus upon those that remain with the Member States.”

The legal service said MEPs’ power of political control was laid down in the Treaty of the European Union but that this “cannot become a general clause of accountability of Member States before the Parliament.”

“The purpose of a committee of inquiry cannot be to substitute itself for the Commission by asking Member States to provide it with information on the transposition and implementation of Union acts, unless this request is duly founded through a link with alleged contraventions or facts of maladministration in the application of these acts of Union law.” 

Minister Konrad Mizzi (left) and OPM chief of staff Keith Schembri could be summoned by MEPs

Mizzi: No communication from MEPs yet 

One of the MEPs who sits on the committee, Germany Green MEP Sven Giegold, said Malta’s former energy minister Konrad Mizzi – the only EU minister to have set up a Panama offshore company through Mossack Fonseca to hide his beneficial ownership while in office – “should consider preparing for an invitation” but cautioned that the committee should only summon witnesses after a thorough study of tax avoidance regimes.

On his part, minister Mizzi told MaltaToday yesterday that he had not received any correspondence from the committee. “If I receive correspondence I will respond at the time,” the now ‘minister without portfolio’ said.

Mizzi had the energy portfolio removed after a month of deliberation by Prime Minister Joseph Muscat since the Panama Papers were leaked, which revealed Mizzi and Muscat’s chief of staff Keith Schembri used Mossack Fonseca to set up a Panamanian offshore company and offshore trust in New Zealand to manage their wealth and future business interests.

Despite repeated calls for resignation from civil society groups and the Opposition, Muscat chose self-preservation and reshuffled his Cabinet, in a bid not to alienate Labour members.

Nationalist MEPs Roberta Metsola and David Casa (EPP) are members of the Panama Papers committee.

The committee will also investigate a potential breach of the duty of “sincere cooperation”, a principle enshrined in the Treaty of the EU, by any member state that failed to take the appropriate measures to prevent the operation of vehicles that allow to hide their ultimate beneficial owners from financial institutions and other intermediaries, lawyers, trust and company service providers – including looking at the role of trusts, single-member private limited liability companies and virtual currencies.