Global menu

Our global pages

Close

The Dutch entrepreneur and (inter)national anti-bribery legislation

  • Netherlands
  • Corporate

06-06-2014

During the past years, considerable attention has been paid to combating corruption, also in view of several corruption scandals that have been discussed extensively in the media. In various countries the legislation has been tightened and international organisations have issued guidelines, in order to curb corruption.

The Organization for Economic Co-operation and Development (OECD) has issued guidelines for multinational enterprises for combating bribery. Furthermore, urged by the United States, the anti-corruption treaty has been effected (the “Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and related instruments”, 2001) because American enterprises were bound to the strict rules of the FCPA (as explained below).

In the European Union there has also been renewed interest for the matter. We refer to our newsletter “Recent anti-corruption initiatives in the EU”.

The United States and the United Kingdom both have strict anti-bribery legislation with extra-territorial jurisdiction, which could be relevant for Dutch entrepreneurs.

The aforementioned gives reason enough to outline the risks that arise from the anti-bribery legislation for Dutch entrepreneurs. We will conclude by giving some recommendations as to how to prevent your organization from coming into contact with anti-bribery legislation.

1. Dutch legislation

The current Dutch legislation criminalizes any form of bribery of public officials and judges (in and outside the Netherlands), including passive bribery. Furthermore, work related bribery is criminalised; the law requires that the bribed person conceals the bribery from his employer.

The OECD task force that studied the compliance with the aforementioned anti-corruption treaty came to the conclusion that the Public Prosecution Service does not prosecute strict enough. Especially in the field of the so called “mailbox companies” (incorporated in the Netherlands due to the favorable tax climate and the limited supervision), the Dutch government is unsuccessful. Furthermore, the low sanctions are criticized.

Minister Opstelten has announced that the legislation will be tightened in a legislative proposal, in which the maximum sentences for bribery and money laundering are increased, the possibilities to confiscate the proceeds of crime are expanded and repeat offenders and convicted entities can be punished more severely. Furthermore, the abuse of subsidies supplied by the central government, lower governments and international organization is criminalized (previous: only abuse of subsidies supplied by the European Community).

2. The FCPA and the Bribery Act

The aforementioned American Foreign Corrupt Practices Act (FCPA) and especially the British United Kingdom Bribery Act (Bribery Act) can apply directly to Dutch enterprises due to their extra-territorial jurisdiction.

In short, a person or entity which acts on behalf of an American entity or a subsidiary thereof, is subject to the FCPA. Additionally, companies may be prosecuted for using U.S. mails or any means or instrumentality of interstate commerce in furtherance of a corrupt payment of a foreign official, which does not necessarily entail more than a payment via internet or e-mail traffic in and to the United States.

The Bribery Act stipulates that not only acts that take place on the territory of the United Kingdom are subject to the Bribery Act, but also acts outside the United Kingdom by a person/entity with a close connection to the United Kingdom (for example British citizens, entities incorporated under the laws of the United Kingdom and possibly their subsidiaries, agents and service providers). In the event the acts are performed by a person or entity that does business with the United Kingdom (for example a branch or a distribution network), the Bribery Act applies. An enterprise even violates the Bribery Act when it has done business in the United Kingdom if an agent, employee or subsidiary offered or accepted a bribe anywhere in the world, regardless of whether the misconduct involved the business in the United Kingdom and even if the company had only limited contacts with the United Kingdom.

In short, this foreign legislation has such a broad scope of application, that also Dutch persons or entities could come into contact with the consequences thereof.

The Bribery Act as well as the FCPA comprise high sanctions ((unlimited) fines and prison sentences), which can be imposed on the enterprise as well as the individual board members and other persons involved with the sanctioned acts. Convictions can be made public, resulting into reputational damage. The Bribery Act also comprises the sanction of the prevention of bidding for a government contract, which can especially affect companies in the building industry.

3. Which acts are criminalised?

The various legislations have similar definitions of the punishable acts, but there are differences between the definitions of –for instance- bribery. The sanctioning and the way in which liability can be prevented also differ.

Bribery

The FCPA prohibits the willful use of the mails or any means of instrumentality of interstate commerce corruptly in furtherance of any offer, payment, promise to pay, or authorization of the payment of money or anything of value to any person, while knowing that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to a foreign official to influence the foreign official in his or her official capacity, induce the foreign official to do or omit to do an act in violation of his or her lawful duty, or to secure any improper advantage in order to assist in obtaining or retaining business for or with, or directing business to, any person. The FCPA also gives instructions regarding the bookkeeping of companies. An actual payment does not have to be proven.

In part the provisions of the Bribery Act are similar to the aforementioned provisions of the Dutch Criminal Code. What is different is the introduction of a ‘risk liability’ regarding failing corporate governance on anti-bribery for any company (wherever in the world) that has part of its activities in the United Kingdom. The only salvation is if the company can show that it applies adequate procedures to prevent bribery. The notes to the Bribery Act stipulate something about the content and meaning of the definitions, but the basic premise is that the judge will rule case by case whether or not the Bribery Act is applicable and whether or not it has been violated. According to the notes to the Bribery Act, this means that these processes must be clear, practical, accessible and enforceable.

The Bribery Act seems to be stricter than the FCPA on several points:

An important difference is that the Bribery Act also concerns private to private bribery and passive bribery. Furthermore, the liability for third parties is stricter than under the FCPA (associated persons versus vicarious liability).

Based on the FCPA, it must be proven that the briber had the intent to bribe, whereas this is not necessary under the Bribery Act when it concerns a public official. The omission to prevent bribery has a broader scope under the Bribery Act. It concerns UK companies wherever they do business and companies that do business in the United Kingdom wherever they were incorporated.

Successor liability

When it comes to mergers and acquisitions, a company must be aware of the possibility of successor liability. Based on the Bribery Act as well as the FCPA it is possible to hold the buyer of a company liable for bribery that has occurred in the target, even if this occurred before the transfer.

Should it become apparent that criminal acts have been committed in the target, the enforcers will assess the extent to which the buyer has done due diligence to the possible risks in the field of corruption and to the measures that the company has taken to prevent corruption.

It is recommendable that with the due diligence and the drafting of the purchase agreement, this legislation is taken into account, that it is assessed whether or not it has been or is applicable to the target and if so, if there is any risk involved. Subsequently, sound warranties must be stipulated in the purchase agreement regarding possible liabilities under the legislation.

4. Prevention of liability

Based on the FCPA, under circumstances there is no liability if the acts concerned were legal under the legislation of the country in which the acts took place.

Furthermore, liability can be prevented if the company has taken adequate measures and has done everything in their power to prevent corruption.

It is recommendable to take the following measures in your company:

 

  • Set up a policy to which all employees are bound, and enforce and review the policy;
  • Set up procedures to ensure that the bookkeeping is correct and complete;
  • Set up procedures to identify persons regarding whom a risk exists that they will expose their selves to inappropriate behaviour;
  • Set up procedures to assess relationships that the company has with third parties;
  • Set up a program for whistle-blowers, internal investigations and sanctioning;
  • Perform an adequate due diligence when it comes to mergers and acquisitions, and draft specific clauses (warranties) in the purchase agreement based on which the buyer can recover damages based on a possible liability.

 

 

For more information contact

< Go back

Print Friendly and PDF
Subscribe to e-briefings