I. Corporate liability deriving from criminal activity
1. Nature of the liability (criminal, administrative) and basis (crimes committed by directors or representatives, in the interest of or for the advantage of the company)
A company may be criminally liable for its activities under Article 51 of the Dutch Criminal Code, which provides that criminal offenses can be committed by natural persons and legal persons. For the purpose of the Dutch Criminal Code, natural persons (human beings) and legal persons (eg, companies) are equal in standing. This equality is accepted for practical reasons, as it makes it possible to hold a company liable for behavior that may be attributed to it, as if it were a human being. Unincorporated companies, partnerships, shipping companies and special-purpose funds are considered equal to legal persons for the above purposes.
As the legislator left to legal practice, to a large extent, to interpret Article 51 of the Dutch Criminal Code in practice, case law of the Dutch Supreme Court and that of lower courts is of utmost importance.
According to the Supreme Court, the basis for criminal liability of a legal person is whether the relevant behavior can be reasonably attributed to it. If this is the case, such behavior may in principle be attributed to the legal person. Although this depends on the circumstances of the case, an important factor is whether the relevant behavior occurred or was performed in the sphere of the legal person concerned.
Behavior in the sphere of the legal person may exist if one or more of the following circumstances is present:
- The omission or act was committed by a person employed by the legal person, whether in an employment relationship or on any other basis.
- The behavior corresponds to the legal person’s normal course of business or performance of duties.
- The behavior served the legal person in its business or performance of duties.
- The behavior was at the disposal of the legal person and it accepted or tended to accept such or similar behavior, including the failure to take reasonable care to prevent the behavior from occurring.
2. Type of crimes or offenses from which, according to the legislature, corporate liability may arise.
According to Article 51 of the Dutch Criminal Code, a legal person can in principle commit any type of crime. Therefore, all crimes in the Dutch Criminal Code may ― in theory ― give rise to corporate liability. That said, companies are often prosecuted for the following types of crimes: forgery of documents (Article 225), embezzlement (Article 321), bribery (Article 328ter) and money laundering (Article 420bis).
In addition to the Dutch Criminal Code, the Economic Offenses Act (EOA) provides for possible criminal sanctions for violation of certain regulatory requirements imposed by a variety of laws, such as environmental licensing provisions, custom laws or sanction laws. As a violation of these laws could be criminally sanctioned under the EOA, corporate liability may also arise on the basis of this Act.
Finally, corporate criminal liability may also arise from tax law violations.
3. Identification of companies and entities to which liability may apply
Any legal person governed by private law can commit a criminal offense. Unincorporated companies, partnerships, shipping companies and special-purpose funds are considered equal to such legal persons for this purpose.
4. Corporate liability for crimes committed abroad by representatives or subsidiaries
Articles 2 to 7 of the Dutch Criminal Code provide for legal jurisdiction of the Dutch public prosecutor to initiate a criminal suit. These provisions are very complex and very much depend on the facts of the case, as well as on whether or not the Netherlands has jurisdiction.
In general, all persons on Dutch territory are required to abide by Dutch criminal law. All Dutch individuals and companies established in the Netherlands are legally bound to adhere to the Dutch Criminal Code, even if they are located and operate outside the Netherlands. For example, a US branch office of a company established in the Netherlands may, under Dutch law, be held liable for criminal behavior in the Netherlands.
5. Corporate liability in the case of transactions taking place after the commission of a crime (acquisitions, mergers, demergers, etc.)
If a legal person is converted into or continued by another legal person, the latter might be criminally prosecuted for the behavior of the previous person. Attribution of criminal liability to a legal entity is not based on mere corporate legal structures, but rather on “social reality” with regard to actual involvement of the legal entity in the criminal behavior. For example, if an acquiring company continues certain criminal behavior of the acquired company as before after an acquisition, it may be prosecuted for acts committed by the legal predecessor.
If, for whatever reason, a company can no longer be prosecuted (eg, if the public prosecutor decided not to prosecute the company, or the company agreed to a settlement), it does not mean that representatives or subsidiaries can also not be held liable and prosecuted.
II. Applicable sanctions
1. Type of sanctions applicable to the company
Article 9 of the Dutch Criminal Code provides for the following possible sanctions:
- Community punishment order
- Deprivation of certain rights
- Publication of court decision
As imprisonment, detention or community service are not applicable to companies as such, a fine is the only main penalty that may be imposed on a company. The absolute minimum fine is EUR 3. Article 23 of the Dutch Criminal Code provides for six fine categories that specify the maximum fine for each category:
- First category: EUR 410
- Second category: EUR 4,100
- Third category: EUR 8,200
- Fourth category: EUR 20,500
- Fifth category: EUR 82,000
- Sixth category: EUR 820,000
For legal persons, Article 23(7) of the Dutch Criminal Code provides that it is possible to impose a fine of the next higher category if the maximum fine does not represent adequate punishment for the crime committed. If a fine of the sixth category may be imposed, but this does not suffice, a fine of up to 10% of the annual turnover of the legal person in the previous financial year may be imposed.
The EOA also provides for sanction possibilities for offenses which may be criminally sanctioned under the EOA. The maximum fines correspond with those contained in Article 23 of the Dutch Criminal Code. However, Article 6 of the EOA provides that a fine of the next higher category may be imposed if the profits resulting from the criminal behavior exceed 25% of the prescribed maximum fine.
Compared to the Dutch Criminal Code, the EOA provides for three additional sanction possibilities: (i) full or partial shutdown of the company; (ii) an administration order; and (iii) imposition of an obligation on the company to repair the damage caused and restore the situation, to the extent possible, as if the criminal behavior did not occur.
2. Interim measures, cease and desist orders, bans and confiscatory measures
Please see IV.2 below.
3. Liability of directors or managers for not having adopted (intentionally or negligently) measures for the prevention of the crime
According to Article 51 of the Dutch Criminal Code, a natural person that exercised de facto leadership over ― or commissioned ― a criminal offense of a legal person may be prosecuted and convicted for such criminal behavior. This may be established on the basis of active or passive behavior of the person concerned.
With regard to passive behavior, this is especially true if the natural person: (i) was authorized and reasonably obliged to take measures for prevention or ceasing of the prohibited behavior but failed to do so; and (ii) at least deliberately accepted the considerable chance that such prohibited behavior would occur.
Prosecution of the legal person concerned is not required for the prosecution of de facto leaders or commissioners.
III. Measures and “models” of prevention and effects of the same on corporate liability and applicable sanctions
Although there is no prosecution or liability exemption due to the existence ― and implementation ― of a compliance program under Dutch criminal law, such program may reduce the risk of exposure to criminal behavior and/or mitigate the severity of a possible sanction.
That said, based on Dutch law and case law, a company should not rely on the (mere) existence of a compliance program, as a statement could easily be made that such program apparently did not work if the company is prosecuted for a criminal offense. In such case, the main question that needs to be answered is whether the company did everything it could reasonably have done to prevent the criminal act from being committed. If the compliance program (in combination with other measures) satisfactorily addresses this question, this may be a ground for exculpation and might preclude a conviction.
IV. Judicial proceedings to determine corporate liability
1. Court competent to decide the liability of and penalties applicable to the company
Based on Article 2 of the Dutch Code of Criminal Procedure, the following criminal courts are, in general, competent to take cognizance of criminal offences:
- the district court where the criminal behavior took place
- the district court where the suspect lives or the company is located
- the district court where the suspect is located
- the district court where the suspect’s last known residence is located
- the district court where the suspect is already being prosecuted for another crime
Jurisdiction in the Netherlands is a very complex matter, so there are many exemptions. It would be beyond the scope of this chapter to further explain so, but in the far majority of criminal cases, these are the applicable rules. Based on the EOA (Articles 38 and 39), specialized criminal courts are competent to judge the case. Economic crimes should be prosecuted before an economic chamber of the criminal court.
2. Possibility of the application of interim measures
There are two kinds of interim measures provided for in the Dutch Code of Criminal Procedure: seizure of goods for evidentiary reasons or in the public interest (Article 94 Dutch Code of Criminal Procedure), and seizure of goods to safeguard the enforcement of payment of a fine or the confiscation of goods following a conviction by the court (Article 94a Dutch Code of Criminal Procedure). Whilst the first is based on the decision of a public prosecutor, the second requires authorization by an investigation judge.
Seizure of goods for evidentiary reasons (Article 94 of the Dutch Code of Criminal Procedure) may take place either to use these goods as evidence in criminal proceedings or to remove them from society or to declare them forfeit to the state (generally because they are deemed to be dangerous). Alternatively, the seizure of goods may take place to safeguard the payment of a fine in case of a conviction, to ensure payment of damages to a victim, or to ensure the fulfilment of a measure to confiscate the proceeds of a crime (Article 94a Dutch Code of Criminal Procedure).
Seizure on the basis of Article 94 of the Dutch Code of Criminal Procedure may be changed into seizure based on Article 94a of the Dutch Code of Criminal Procedure, subject to the condition of authorization by the investigating judge.
In addition to the seizure set out above, and only in case a criminal financial investigation is opened by the investigating judge, the authority of the public prosecutor to issue a freezing order with regard to the proceeds of criminal offenses in connection with the same criminal financial investigation is implied (Articles 103, 126 and 126b of the Dutch Criminal Code).
3. Plea bargains and related effects on corporate liability
Plea bargains do not exist in the Netherlands, as known in the United States, but the Public Prosecution Service and suspected company often agree on a settlement. Usually, a settlement includes an obligation for the company to pay a fine and to implement a specific compliance program. Under Dutch law, a settlement does not imply that guilt has been established in any way. Because prosecution guidelines stipulate that settlements above EUR 50,000 should be published, a public statement is usually drafted as a part of a settlement. In these statements, it is always clearly stipulated that a guilty plea hasn’t been made in in any way.
4. Imposition of sanctions against the company
The same sanctions that may be imposed on a natural person may also be imposed on a company, except of course sanctions that, due to their nature, cannot be imposed on companies (eg, imprisonment). Hence, under Article 9 of the Dutch Criminal Code the following sanctions may be imposed on a company: a fine; withdrawal of certain rights; forfeiture; and public disclosure of the sentence.
Moreover, specifically in connection with economic crimes, other sanctions may be imposed on the company. These sanctions include, for example, the temporary termination of business for a time period of up to one year (Article 7(c) of the EOA), or restraint of the enterprise as provided for in Article 8(b) of the EOA.
5. Permanence of corporate liability if the crime is extinguished
Bankruptcy of a company does not prevent prosecution of the company. The rule that applies to natural person (ie, that the right to prosecute is terminated automatically upon the death of a natural person) does not apply to a company.
If a company is liquidated to escape a conviction and the business is continued under another name, “social reality” will prevail. If the successor is in fact the same entity as the liquidated company, the successor can be convicted for acts committed by the liquidated company.
Even if prosecution of the company for its acts is no longer possible, natural persons may nonetheless be prosecuted for directing those acts.
Finally, the right to prosecute may become time-barred. The length of the limitation period depends on the type of criminal act. For some very serious criminal acts, no limitation period applies. In general, the limitation period commences as of the day after the fact has been committed, subject to interruption of the limitation period.
V. Corporate liability in multinational groups
1. Liability of parent companies located abroad in the case of offenses committed by directors, managers or representatives of the local company
As mentioned earlier, the criminal liability of parent companies depends on a few factors, the first of which is jurisdiction. When jurisdiction is established in any way, the question will be: “What is the “social reality?” A company may officially declare that it resides in another country, where it is in fact residing in the Netherlands. This should be established on a case-by-case basis. When assessing whether or not parent companies are liable in criminal cases, the court will decide based on “social reality” rather than on civil law grounds. Furthermore, the court will consider whether the parent company had the authority or power to approve or prevent the criminal behavior that took place in the Netherlands.
2. Basis of liability and applicable sanctions
The basis of liability has already been discussed in paragraphs I and II above and the sanctions that can be imposed have been discussed in paragraphs II and IV.4 above.
VI. Significant case law concerning corporate liability arising from crimes and draft laws under discussion
1. Relevant case law
Supreme Court 26 April 2016, ECLI:NL:HR:2016:733: Criminal liability of an individual for directing behavior that led to the criminal offense by the company (Article 51 Section 2, under 2, of the Dutch Criminal Code). The Supreme Court gives an overview of relevant case law in this matter.
Supreme Court, 21 October 2003, NJ 2006/328 (Drijfmest-arrest): Criminal liability of a company. A company will risk being criminally liable when it permits the behavior that led to the criminal offense, or if it was within the legal power of the company to prevent the criminal behavior from happening.
Supreme Court, 23 February 1954, NJ 1954/ 378 (IJzerdraad-arrest): A manager or director can be held accountable for the criminal behavior of an employee.
2. Proposed or contemplated new legislation