Assessment of additional measures to exclude illegal timber from EU markets Outline of study and country studies Duncan Brack Associate Fellow, Sustainable Development Programme, RIIA Illegal logging update and consultation meeting Chatham House, 19 January 2006

2 Gap in system (1) Licensing scheme heart of FLEGT initiative Some countries will not join licensing scheme ‘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) Will be available on Monday (23 January) Spain

7 UK study: criminal legislation Theft Act 1968: handling stolen goods Location of original theft not relevant Only some illegal timber can be defined as ‘stolen’ Offence applies only where individual knows products are stolen No need for criminal prosecution or investigation in country of origin; but obviously need evidence Also need to show continuity of evidence Providing proof beyond reasonable doubt likely to be very difficult

8 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 Still need to show continuity of evidence

9 UK study: customs misdescription 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 Note problems with rules of origin Analysis of changes in trade patterns likely to be important

10 UK study: money laundering Proceeds of Crime Act 2002 – disposal of proceeds of criminal activity Specifically aimed at illegal activity overseas Possibility of civil recovery where criminal convictions not obtained – balance of probabilities Money laundering offences Failure to disclose (regulated sector) Timber importers may have defence of ‘adequate consideration’ Particularly likely to be useful where prosecution in country of origin – go after proceeds as well

11 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 in UK to seize illegal timber FLEGT licensing system still best solution But action under any legislation would have major demonstration effect; incentives to assure legality

12 Estonia study Estonian penal law only applies to crimes committed in Estonia But environmental law requires proof of legality when timber transferred (regardless of origin) Should be sufficient, but recognise that no illegal timber imports seized to date Problems: lack of clarity of law, competence of inspectors, lack of awareness and resources No real possibility of detecting legality of imports – no cooperation with Russian authorities Resistance from industry to more bureaucracy

13 Italy study CITES only effective means of tackling import of illegal timber into Italy Other laws could be applicable in theory; money laundering seen as most relevant Problems: lack of cooperation with enforcement agencies in country of origin Problem: lack of awareness amongst Italian enforcement agencies Problem: general presumption in favour of trade liberalisation Customs is attempting to improve cooperation with other enforcement agencies

14 Netherlands study Illegal timber only illegal if results from acts that would be illegal under Dutch law Possible relevance: theft, handling stolen goods, corruption, money laundering Practical difficulties: lack of investigation in country of origin; continuity of evidence Preferred solutions; FLEGT license; business supply chain initiatives; use of CITES; public procurement policy; measures on conflict timber

15 Options for new legislation New legislation only worthwhile if it can help to solve or short-circuit practical problems identified above Three broad options to be examined – 1.Ban on import of unlicensed products regardless of origin 2.Prohibition on import (and purchase, sale, possession, transport, etc.) of illegal products (similar to Lacey Act) 3.Improving international cooperation frameworks

16 Timetable Preliminary paper from CH (July) Series of country studies on existing national legislation (coordinated by CH) (September – December) Full assessment of options for new legislation, usefulness of existing frameworks (CH) (September – December) International workshop considering studies and options (31 January) Final report – outline of options for Commission and member states (CH) (April)

17 1 Trade ban Ban on import of unlicensed products regardless of origin WTO problems unless applied to domestic products Could be significantly disruptive to trade Depends on extent to which existing documentation adequate to indicate legality Also depends on how many producer countries (including those not suffering significantly from illegal logging) sign VPAs Possible multilateral agreement in long term?

18 2 New criminal legislation (1) Prohibition on import (and purchase, sale, possession, transport, etc.) of illegal products Similar principle as US Lacey Act (mainly fish and wildlife) (highlighted in FLEGT Action Plan) Gives authorities power to confiscate illegal goods even if importers did not know they were illegal Does not require cooperation with foreign country (though easier if does cooperate) Many practical problems, including detection of products and obtaining evidence But not a WTO issue Legislation in EU: EU or member state?

19 2 New criminal legislation (2) German draft Virgin Forests Act (amendment to federal Nature Conservation Act) Prohibits possession and marketing of timber and timber products illegally logged in virgin forests Applies only to large-scale marketers/processors (but large-scale = >€100,000/year) Possibly scope for amendment of legislation in other member states? Possible amendment of Council Framework Decision on the protection of the environment through criminal law?

20 3 International frameworks Interpol World Customs Organisation FAO Guidelines for Forest Law Compliance UN Convention on Transnational Organised Crime UN and OECD agreements on bribery and corruption Others Possible regional enforcement protocols?