European Parliament launches an inquiry into Panama Papers scandal

Werner Langen MEP (EPP, Germany) was elected as Chair of this committee on 12 July 2016. Shortly after the Panama Papers revelations, Members of the European Parliament (EP) requested that a committee be set up to investigate the allegations behind the Panama Papers and the alleged contraventions of EU Law in relation to anti money laundering and tax evasion. 

On 4 April 2016, the consortium of investigative journalists published extracts from over 11 million documents, or 1.8 terabytes of data which were leaked by an anonymous source from the Panamanian law firm, Mossack Fonseca. The documents primarily revealed how shell companies and/or trusts had been used for aggressive tax planning and in some cases for tax evasion and money laundering. The papers have highlighted the need for more transparency in beneficial ownership across the EU and internationally. It has also drawn attention to the importance of the exchange of tax information between countries and the rising exploitation of tax havens.

The mandate of the Panama Paper Inquiry Committee (the “Committee”) was decided by the EP Conference of Presidents on 2 June 2016. Accordingly, the Committee will have the power to investigate the alleged failures of the Commission and/or Member States to enforce and implement a number of directives relating to tax information and tax havens. It is expected that the Committee’s work will tie in with the work previously carried out by special committees; TAXE 1 and TAXE2.

The Committee is however, limited to acts bound by EU law and therefore does not have the right to conduct investigations into the actions of third countries’ authorities and nor can it examine general policy areas with a view to making proposals. The focus of inquiry committees’ must be on inter alia abuses of power, incompetence, omissions, negligence and violations of EU law. 

In order to collect evidence to verify the alleged allegations, the Committee will be able to invite witnesses and receive their written submissions as well as hold hearings with experts. Note however, that the Committee does not have the power to subpoena named individual witnesses and nor can it impose sanctions against authorities or persons refusing to appear before it. The Committee will also have the right to request such documents of Member States authorities that will aid its investigations. Again however there is a check on this power; Member States and the EU institutions can refuse to authorise collaboration and the provision of documents on the grounds of secrecy or public or national security arising out of EU law.

Whilst the Committee will not have any power to sanction individuals or authorities for refusals to appear or provide documents, it can ask the Commission to initiate infringement proceedings  against a Member State who is refusing to cooperate (Article 4(3) TFEU) and can assert political pressure on EU bodies refusing to cooperate.

Generally, the hearings and testimony will take place in public unless otherwise requested by either: one quarter of the Members of the Committee, the EU or national authorities or where secret information is being reviewed.

The legal basis for the setting up of an inquiry committee is found in a 1995 inter -institutional agreement and the EP Rules of Procedure, in particular rule 198. The main objective of an inquiry  committee is to investigate alleged contraventions of Union law and alleged maladministration in the application of Union law which appear to be the act of the Commission, and public administrative bodies of Member States.

The Committee has 65 members and will have 12 months to carry out its investigations and submit a report in plenary although this period can be extended twice for three months by a majority vote in plenary. The report may contain a number of recommendations to Member States and/or EU institutions. The EP can subsequently instruct various standing committees to monitor follow up actions to those recommendations.