A German tax scandal (CumEx) has highlighted the importance of extradition agreements in Europe
A German court convicted in March two former London investment bankers for tax evasion over so-called cum-ex trades, the first case of its kind in Germany. This type of trading was accepted as a common practice by sophisticated equities traders until 2012.
The cases were charged as tax evasion under the German fiscal code, triggering controversy as local authorities allowed the practice for many years and did not allege that all the actions were dishonest.
The two convicted traders managed to avoid prison sentences, despite the tax evasion involving several million euros. The scheme operated in numerous European countries and the investigations taking place involve hundreds of suspects.
In Germany more than 900 people are under investigation. This is expected to lead to a large number of prosecutions in that jurisdiction and elsewhere in Europe. Near the end of last month, a suspect was arrested in France on an European arrest warrant from the Cologne prosecutor’s office — and Britain can expect this to give rise to increased extradition requests.
This is not unfamiliar territory. The UK courts have dealt with many such extradition cases involving cross-border financial crime.
However, the European arrest warrant may well be in its last year of operation. As part of the withdrawal plans under Brexit, the government is planning not to rejoin the scheme.
Similarly, other mechanisms used to combat crime, such as the European investigation order and membership of Europol and Eurojust, are only available to full EU members. The failure properly to negotiate a package of co-operation in criminal matters in extradition and cross-border assistance could severely hamper law enforcement efforts.
It may be the case that at the end of the Brexit transition all existing warrants become void and there does not appear to be a proper plan to replace them.
In multijurisdictional cases such as cum-ex there is also the question of whether an individual should face prosecution in the UK rather than extradition. This is at present a ground on which a challenge to extradition can be made. It remains to be seen whether this plays any part of this country’s new extradition laws.
Germany is one of the EU states that has said it will not extradite its citizens to the UK under the warrant or any replacement. The UK has not returned the favour and will extradite to Germany. Brexit negotiations may change this position.
Some other countries, including Austria and Slovenia, have suggested that they will not extradite their citizens to Britain after it withdraws from the EU. With the prospect of a poorly negotiated extradition arrangement and inadequate intelligence-sharing tools, the UK faces becoming a “safe haven” for fugitives.
This article was published in The Times on 16 July 2020 and can be accessed here.