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The Netherlands: Tackling Corruption at Home, Challenged Abroad
Earlier this year, Transparency International released its Corruption Perception Index (CPI) 2015, which evaluates the level of endemic corruption in countries across the globe. The Netherlands secured a spot on the Index as the fifth least corrupt country in the world, moving up from the eighth ranking in 2014 to follow only Denmark, Finland, Sweden and New Zealand in the organisation’s annual report.
Moreover, in 2011, Transparency International produced the latest Bribe Payers Index to capture the views of more than 3,000 business executives worldwide on the extent to which companies from 28 of the world’s leading economies engage in bribery when doing business abroad. The Netherlands ranked highest in this index, meaning that companies from the Netherlands were perceived as bribing abroad the least.
While the Netherlands’ move toward less corruption and its reputable position in these assessments signals the country is doing something right when it comes to keeping corruption at a minimum, the CPI’s analysis only covers the public-sector corruption that takes place within a country’s national borders. Its figures do not include corruption by residents of the Netherlands abroad.
In fact, Transparency International says its research shows half of all the Organisation for Economic Co-operation and Development (OECD) countries are violating their international obligations to crack down on bribery by their companies abroad. The Netherlands falls into that category, much like its northern European neighbours.
The Effect of Out-of-Court Settlements on Perception
It is likely that out-of-court settlements keep a lot of information about alleged corruption out of the public domain. These settlements would also less often lead to prosecution of the natural persons responsible for the corrupt actions.
Well-known cases of Dutch companies involved in bribery abroad are SBM Offshore and Ballast Nedam, which both have been finalised with out-of-court settlements. Furthermore, in February, the Dutch Public Prosecution Service entered into another out-of-court settlement with Russian telecom company VimpelCom, headquartered in the Netherlands. It was part of a joint settlement with the US Department of Justice, in which VimpelCom and its subsidiary paid US$ 397.6 million to the US DOJ and the Securities and Exchange Commission in fines for bribes paid to a government official of Uzbekistan to win bids for Uzbek telecom providers.
And more recently, there has been an investigation into the involvement of Shell in corruption in Nigeria.
This highlights what Transparency International in 2015 discovered – that the level of enforcement by the Netherlands abroad is labelled ”Limited Enforcement,” whereas other countries, such as Germany, Switzerland, the UK and the US employ “Active Enforcement,” while Austria, Australia, Canada, Finland, Italy and Norway demonstrate “Moderate Enforcement.”
In its December 2012 release of its “Phase 3 Report on Implementing the OECD Anti-Bribery Convention in the Netherlands,” the OECD expressed its concerns about the efforts of the Netherlands regarding the active investigation and prosecution of corruption by Dutchmen or Dutch companies abroad.
In its “Follow-up to the Phase 3 Report & Recommendations,” released in May 2015, the OECD noted that the Netherlands has demonstrated significant progress with regard to enforcement, fully implementing 11 out of 22 recommendations and partially implementing six others. Only five of its recommendations were not implemented.
Between the period of December 2012 and May 2015, the Netherlands opened seven new foreign bribery investigations, bringing the total number to 16 since the entry into force of the Convention. Ten of these are ongoing investigations and four have been closed. The remaining two investigations are the cases of the Dutch companies SBM Offshore and Ballast Nedam referenced above that were finalised with sanctions imposed on the defendants through out-of-court settlements. SBM Offshore agreed to a USD 40 million fine and a US $200 million disgorgement for payments in Equatorial Guinea, Angola and Brazil. Ballast Nedam agreed to pay EUR 17.5 million and, in the context of the same case, KPMG Accountants NV agreed to pay a EUR 3.5 million fine and EUR 3.5 million in confiscation in relation to bribery relating accounting misconduct.
Nevertheless, the OECD is also aware of 24 other foreign bribery allegations that do not appear to have been investigated.
Changes to the Criminal Code
On 1 January 2015, relevant amendments to the Dutch Criminal Code entered into force. The amendments simplify and harmonise the offences for foreign bribery, including removing the distinction between bribery to induce a violation of official duty and bribery to receive a benefit within the official’s duty. The amendments also increase the maximum sanctions for foreign bribery. Furthermore, the Netherlands has improved, overall, the regime of criminal liability of legal persons. However, the OECD regrets that the Netherlands has not amended its legislation since Phase 3 to increase protections for foreign bribery-related whistle blowing in the public and private sectors.
Meanwhile, there are several legal instruments to assist a victim of corruption. If the fraudster or corrupt criminal is prosecuted by the Dutch public prosecutor, the victim can request access to the criminal file. This evidence can be used in civil proceedings against the fraudster or corrupt criminal or against related third parties.
Additionally, instead of starting civil proceedings against the fraudster or corrupt criminal, it is possible to join the criminal proceedings as a civil party and request damages.
Furthermore, even if the Dutch public prosecutor reached an out-of-court settlement, the victim is not left empty-handed. According to a specific provision in the Dutch Code of Criminal Procedure, victims may choose to file a written complaint to the court on the grounds that an out-of-court settlement pertains to assets that belong to them. Such complaints should be filed within three months after the fraudster or corrupt criminal complies with the out-of-court settlement. Before doing this, though, one could also reach out to the public prosecutor that dealt with the out-of-court settlement and explain that a client is a victim of corruption and suffered substantial financial damages. Then request from the public prosecutor that the share of the disgorged proceeds collected under the out-of-court settlement connected to the corruption be returned to the victim.
For good use of these instruments, of course, it is of great importance that litigants have access to independent judiciaries – one of the markers that Transparency International recognises as a common characteristic of the least corrupt countries on its Index.
Enforcement Leads to Improvement
Although the Netherlands is perceived as one of the least corrupt countries in the world, there is room for improvement in its efforts of enforcement against corruption abroad. Stimulating active enforcement will, of course, deter from corrupt actions, although the tendency to settle out of court might reduce this effect.
Cathalijne van der Plas is an associate partner at Höcker Advocaten employed in the company law division. Cathalijne’s practice is international in nature, consisting in large part of civil fraud and asset recovery matters. She is often called on by other lawyers to provide advice on complex private international law issues and represents parties in international commercial disputes, including in arbitration.
ICC FraudNet is an international network of independent lawyers who are leading civil asset recovery specialists in each country. Recognized by Chambers Global as the world’s leading asset recovery legal network, our membership extends to every continent and the world’s major economies, as well as leading offshore wealth havens that have complex bank secrecy laws and institutions where the proceeds of fraud often are hidden. Founded in 2004 by the Paris-based International Chamber of Commerce (ICC), the world’s business organization, FraudNet operates under the auspices of the ICC’s London-based Commercial Crime Services unit.