Assessment of additional measures to exclude illegal timber from EU markets Outline of study and UK study Duncan Brack Associate Fellow, Energy, Environment & Development Programme, Chatham House Chatham House / European Commission workshop Brussels, 31 January 2006

2 Gap in system (1) Licensing scheme heart of FLEGT initiative Some countries will not join licensing scheme Direct and indirect problems with imports ‘In the EU there is currently no Community legislation prohibiting the import and marketing of timber and timber products produced in breach of the laws of the country of origin’ (Action Plan (4.2.4)) Commission will therefore: ‘review options for, and the impact of, further measures, including, in the absence of multilateral progress, the feasibility of legislation to control imports of illegally harvested timber into the EU …’

3 Gap in system (2) Action Plan (4.6.1) (money laundering) Commission will: ‘undertake work to establish the extent to which existing Member State legislation for money laundering is applicable to forest sector crimes …’ Action Plan (4.6.3) (other legislative instruments) Commission will: ‘raise awareness, and encourage Member States to apply existing criminal legislation and other legislative instruments …’

4 Gap in system (3) Council Conclusions para 13: ‘Invites the Commission to … review options for, and the feasibility of, further legislation to control imports of illegally harvested timber … taking account of relevant initiatives in other areas, as well as existing multilateral mechanisms …’ Council Conclusions para 14: ‘Urges Member States to provide the Commission with relevant information regarding national legislation which could be applied to address the illegal logging issue …’

5 Aims of study To assess the usefulness of existing member state legislation To consider the practical implications If existing legislation is felt to be inadequate, to set out options for new legislation To consider the practical implications To assess the usefulness of existing frameworks for international cooperation To consider any WTO-related issues

6 Existing national legislation: country studies UK (Chatham House) Estonia (Nepcon) Italy (University of Padua) Netherlands (Government) Spain

7 UK study Criminal law Civil law Customs regulations Money laundering Legal opinion to come, March 2006

8 UK study: criminal legislation (1) Theft Act 1968: handling stolen goods ‘A person handles stolen goods if … knowing or believing them to be stolen goods he dishonestly receives the goods, or dishonestly undertakes or assists in their retention, removal, disposal or realisation by or for the benefit of another person, or if he arranges to do so.’

9 UK study: criminal legislation (2) Location of original theft not relevant Only some illegal timber can be defined as ‘stolen’ – ‘Illegal logging takes place when timber is harvested, transported, bought or sold in violation of national laws. The harvesting procedure itself may be illegal, including corrupt means to gain access to forests, extraction without permission or from a protected area, cutting of protected species or extraction of timber in excess of agreed limits. Illegalities may also occur during transport, including illegal processing and export, misdeclaration to customs, and avoidance of taxes and other monies.’

10 UK study: criminal legislation (3) Offence applies only where individual knows products are stolen … … though previous convictions may help to tilt balance of evidence against them No need for criminal prosecution or investigation in country of origin; but obviously need evidence Mechanisms of international police liaison often slow Also need to show continuity of evidence Providing proof beyond reasonable doubt likely to be very difficult

11 UK study: criminal legislation (4) Only illegal timber seized in UK in recent years has been under CITES (COTES regulations) Avoids most problems with Theft Act – needs evidence at point of import Problems: no independent verification of legality; most timber species not listed

12 UK study: civil legislation Civil proceedings could be taken by or on behalf of original owners of the timber Tort of conversion – wrongful possession of another’s goods Action can be taken even if importer or final purchaser did not know timber was stolen Burden of proof is lighter – balance of probabilities Still need to show continuity of evidence

13 UK study: customs misdeclaration Customs and Excise Management Act 1979 – sections deal with evasion of duty and misdescription Seems unlikely that importers of illegal timber would evade payment of duty, or misdescribe products Exception: VPA timber disguised as non-VPA timber (though depends on enforcement regime for FLEGT) Note problems with rules of origin Analysis of changes in trade patterns likely to be important Also cooperation with foreign customs agencies

14 UK study: money laundering (1) Proceeds of Crime Act 2002 – disposal of proceeds of criminal activity Clearly covers illegal activity overseas Possibility of civil recovery where criminal convictions not obtained – balance of probabilities Money laundering offences Failure to disclose (regulated sector)

15 UK study: money laundering (2) But chain of movements and transactions in the timber trade likely to look much less suspicious than in, e.g. disposing of the proceeds of drugs crime Also same problem as before with definitions Also timber importers may have defence of ‘adequate consideration’ Likely to be most useful where prosecution takes place in country of origin – go after proceeds as well

16 UK study: general All options of possible use in theory All suffer from serious practical difficulties Complexity of cases, and need for cooperation from overseas General low priority afforded to issue among enforcement agencies CITES only mechanism used to seize illegal timber FLEGT licensing system still best solution Action under any legislation would have major demonstration effect – increase incentives to assure legality