The Hungarian Treeless Treetop Walkway

In the small village of Nyírmártonfalva in northeastern Hungary, there stands a wooden treetop walkway designed for walking among the tree canopies. Yet, there are no trees around. Because the project was realised through EU funds, the European Public Prosecutor’s Office (EPPO) initiated proceedings to investigate this allegedly fraudulent appropriation of the EU common budget. In early August 2024, the Hungarian Office of the Prosecutor General (OPG) issued a public statement arguing that the EPPO does not have any jurisdiction regarding the offences committed within the territory of Hungary by a Hungarian citizen since Hungary is not a member of the EPPO. The statement is misleading at best. The EPPO has jurisdiction according to the result theory, which is also accepted in Hungary. It establishes jurisdiction due to the place where the result of an offence occurs. The only way to avoid the respective proceedings would be much quicker national proceedings resulting in res iudicata, thus preventing the EPPO from prosecuting in (ne) bis in idem.

Treetop without the trees and the circumstances of the case

The mayor of the small Hungarian village Nyírmártonfalva obtained a gross HUF 64 million (approximately EUR 166,000) EU funding for the construction project to build a 50-metre-long canopy walkway. However, during the construction of the treetop walkway, the forest was cut to the ground. The treetop walkway, meant to observe the canopies of the trees, now stands on its own in a desert.

The acts concerned are likely fraudulent activities (e.g. budget fraud, misappropriation of funds, abuse of public authority) committed in the course of obtaining EU funding for the canopy walkway, which have allegedly caused harm to the financial interests of the European Union, i.e. damage or material loss to the common budget.

The EPPO has changed its mind

The Hungarian Transparency International, an anti-corruption watchdog, first reported the details of the respective incident to the EPPO. Initially, the EPPO refused the substantive examination of the case due to its lack of jurisdiction, as it explained in its first reaction to TI-Hungariy’s complaint, dated 23 February 2024.

Nonetheless, the EPPO eventually changed its legal position and concluded it had the jurisdiction to launch the proceedings. The EPPO communicated this decision to the Hungarian authorities under Articles 25(5) and 26(7) of the Council Regulation (EU) 2017/1939 of 12 October 2017, implementing enhanced cooperation on the establishment of the European Public Prosecutor’s Office (EPPO Regulation).

On the jurisdiction of the EPPO

The jurisdiction of the EPPO is determined by the nationality of the (suspected) perpetrator (personal competence) and the place of commission of the offence (territorial competence), in addition to the fact that the EPPO only has the power to investigate and prosecute offences that fall within its material competence, i.e., which affect or are likely to affect the financial interests of the European Union (defined in the so-called “PIF Directive”). As a rule, nationality is hard law, and, in most cases, it can be easily determined whether the suspect is a national of one of the EPPO-MSs (dual citizenship is also relevant). The dilemma of whether the suspected act falls under the material competence of the EPPO can be determined during substantive examination. Accordingly, the EPPO can initiate a procedure when the facts establish a mere suspicion of a crime.

However, the place of commission of the offence is a thin ice, as the EPPO Regulation does not unambiguously define it. Consequently, one has to adhere to the national concepts offered by the Member States’ criminal law and elaborated by the jurisprudence. The question of the place of commission of the offence and the difficulties in its determination are traditionally present in cases, for example, that involve multiple acts or where acts are committed across borders or in the territory of multiple jurisdictions. As a matter of principle, most countries typically accept geographic location as the place of commission of the offence, where any of the elements of the offence is carried out.

Notwithstanding, the jurisdiction in criminal law is not always solely attached to the geographic location of the offence. For example, some crimes are carried out as an omission (failure to perform a legal duty), which is not actually an act in an ordinary sense. Moreover, criminal law often links an offence with the external changes relevant to criminal law (so-called statutory provisions or the elements of the crime). For example, the incurrence of damage in the case of fraud. In these cases, the place of occurrence can be determined using the principle of the place of the result (the so-called result theory). A simple analogy would be a case, for example, where someone shoots across a state border, and the bullet hits someone on the state border’s other side, causing bodily harm. The act itself is performed in one country, while the result occurs in another.

This is the central legal problem in the dispute between the EPPO and the Hungarian OPG. However, the Hungarian OPG’s legal stance is contradictory, at least. Hungarian criminal law acknowledges the result theory, and Hungarian law enforcement authorities normally act when the results of an offence committed outside Hungary materialise in the territory of Hungary (e.g. fraud, budget fraud, or even poisoning etc.). Yet, it does not accept this same legal concept when the EPPO wishes to enforce its own jurisdiction in the said case.

The PIF Directive only mandates the Member States to introduce statutory elements and provisions contained in the PIF Directive into the concept of fraud as defined in their own criminal laws. Although the EU legal definition of fraud (budget fraud) does not explicitly mention the result (causing damage or financial harm), the EPPO will apply the definition from the substantive criminal law of the Member States when examining the scope of material competence.

The harmonisation of national criminal law under the PIF Directive was carried out in all the Member States, including Hungary and, of course, Belgium. This is important because if the offence of “fraud affecting the Union’s financial interests” under Article 3 of the PIF Directive is a crime with a result, then in relation to the common EU budget, the place of the perpetration can be Belgium, as the EU will suffer the damage/loss as an international organisation with legal personality and its seat in Brussels, Belgium. Therefore, this is the missing piece of the puzzle. Suppose fake or forged documents are submitted directly to the EU tendering authorities and not to the authorities of a Member State, Hungary, in our case. In that case, the place where deception occurred was the headquarters of the EU authority, Brussels. Accordingly, the Belgian delegate prosecutor is responsible for carrying out the proceedings and applying and utilising the mutual relationship between Belgian criminal law and EU law.

It is also worth pointing out that criminal jurisdiction, due to the (place of the) result of criminal acts, prevails not only in national criminal law but also in international criminal law and international private law, which is known as the principle of ubiquity.

Consequently, the EPPO’s decision to launch criminal proceedings due to the place of the results of the offence is as pure as the driven snow. Nothing in this decision would suggest a political or legal campaign against Hungary. Furthermore, one cannot even argue that this decision results from a creative legal interpretation.

Yet, the EPPO’s own initial rejection of its jurisdiction offers an opportunity to try to construe an argument that the EPPO’s legal grounds are weak and that it had to search for it with the magnifier. However, there was a sound legal possibility all along, codified due to the specificity of the legal regulation and the necessary interplay between national criminal law and EU law.

Two scenarios ahead

Under the first hypothetical situation, the Hungarian Prosecutor will cooperate excellently as a model partner, just as in the last three years. Based on the working agreement, it will facilitate the straightforward execution of the proceedings, such as the European Investigation Order, European Arrest Warrant, etc. Moreover, Hungarian prosecutors could possibly participate in the consultation procedure under the Framework Decision on the European Arrest Warrant and the Surrender Procedures, if initiated by Belgium or the EPPO. Alternatively, Hungary could transfer the case entirely under the European Convention on the Transfer of Proceedings in Criminal Matters (ETS No. 073).

In the second hypothetical scenario, Hungarian prosecutors and other institutions would reject any loyal cooperation with the EPPO, for example, rejecting an execution of an EAW or EIO. In that scenario, the criminal proceedings may be carried out in absentia, or the EPPO may not receive the necessary evidence from the Hungarian authorities. These elements could jeopardise criminal proceedings and necessitate further legal proceedings at the CJEU, raising questions about the violation of loyal cooperation and other secondary EU laws.

In addition, there is another risk to the effectiveness of the said criminal proceedings, namely the principle of ne bis in idem. If the Hungarian authorities wanted to stop the criminal proceedings carried out by the EPPO, they would have to start their own national criminal proceedings and obtain res iudicata first. If Hungary would indeed begin this race and award a final decision in Hungary, this would stop all the other criminal proceedings in the same matter.

Without going into detail, neither the termination of proceedings against an unknown perpetrator by the investigating authority in Hungary nor the dismissal of the procedure at the stage following accusation, but before indictment, would provide the ne bis in idem effect. This is also supported by the fact that according to Hungary’s Criminal Procedure Law (§ 374), in cases involving serious offences related to public money (such as the acts concerned), further proceedings can be commenced through a special actio popularis, a so-called motion for reconsideration. However, if the prosecution service in Hungary were to apply reprimand or conditional suspension of the prosecution, then Article 54 of the Convention Implementing the Schengen Agreement would take effect. In this case, Hungary and its criminal proceedings would win this race.

Nonetheless, on a disquieting note, it has to be taken into account that the Hungarian authorities are aware of the suspected mismanagement of EU funds in the canopy walkway at Nyírmártonfalva since a year and a half now, as the scandal broke out in March 2023. Since then, TI-Hungary reported this case first to the Integrity Authority in April 2023 and later, in January 2024, to the EPPO. Although the Hungarian authorities claim that a criminal investigation was opened, they have failed to take any meaningful action. They have not identified and interrogated any suspect, although the case does not appear overly complex, and all documentary evidence is available. Hence, this undermines the credibility of the said criminal investigation by the Hungarian authorities.