International Settlements And Recent Developments In The Netherlands
International Settlements And Recent Developments In The Netherlands
Business Crime Defence
Roan Lamp and Youmi Jun, De Brauw Blackstone Westbroek NV
In recent years, the Netherlands has seen a significant shift in its anti-corruption enforcement landscape. Since the OECD Working Group on Bribery expressed its concerns in 2012 over the Dutch public prosecutorâs relative lack of investigative activities and enforcement actions, particularly for foreign bribery cases, the Netherlands has taken substantial steps to implement a number of recommendations. Notably, amendments have been made to the Dutch Criminal Code, increasing the maximu m sanctions for foreign bribery to six years of imprisonment for natural persons and up to 10% of turnover for legal persons. The Public Prosecutorâs Office has increased its resources in bribery investigations, including foreign bribery. The Fiscal Information and Investigation Service has created an anti-corruption centre. In addition, cooperation with foreign law enforcement authorities has further been institutionalised.
The Dutch public prosecutorâs efforts have translated into record-setting settlements of foreign bribery offences, such as the settlements with Telia Company AB, SBM Offshore and Vimpelcom. The total amount of penalties and disgorgements in these three settlements alone (which were owed to the Dutch authorities) neared US$1 billion. It would not be an overstatement to say that the Netherlands has become one of the most active anti-corruption enforcers in the world, occupying a seat at the table in some of the largest global settlements together wit h the US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC).
At the same time, the Netherlandsâ experience with out-of-court settlements has been subject to local criticism that the processes lacked transparency, and that the settlements acted as âget out of jail freeâ cards for offending corporates. Critics have pointed to the broad prosecutorial discretion, the lack of a requirement to admit guilt, the lessened stigma that a settlement carries in comparison to a criminal conviction and the lack of judicial supervision as some of the factors that may make settlements more beneficial to companies than to the public interest. These debates are not unique to the Dutch context. In the US, where a wide array of alternatives to conviction have been used to tackle corporate misconduct for decades, such debates are a regular part of political discourse. An additional element that is often highlighted in the US is the low rate of conviction for resp onsible individuals. We will return to this point.
Despite the recognition that corporate settlements are an all-but-perfect alternative enforcement tool, there appears to be a clear global trend towards enabling more settlements, even in jurisdictions where the tool formerly did not exist. The most prominent example is the heightened interest by authorities worldwide in deferred prosecution agreements (DPA). A DPA is typically an agreement between a defendant and a prosecutor, under which the prosecutor agrees to bring charges but immediately suspend prosecution for a predefined period, subject to certain conditions imposed on the defendant, such as ongoing cooperation in the prosecutorâs investigations and implementation of corporate reforms. The DPA has been a favoured tool of US enforcers, including for offences under the Foreign Corrupt Practices Act, and appears to be enjoying a renewed interest in other parts of the world.
The UK has been one of the firs t jurisdictions to formally introduce the DPA within the context of anti-bribery efforts. The UK Serious Fraud Office (SFO) has entered into four DPAs since the instrument was adopted in 2012, predominantly to resolve offences under the UK Bribery Act 2010, including the ground-breaking Rolls-Royce case that showcased multi-jurisdictional cooperation of the UK, US and Brazilian authorities. Recent statements by the SFO confirm that DPAs have now become the ânew normalâ for UK corporate actors in dealing with criminal risks and are âhere to stayâ. French prosecutors have also been able to make use of DPAs since December 2016, through the law known as Sapin II, and we have seen five DPAs to date. Public consultations and legislation for DPAs are being considered in other countries as well: common law and civil law jurisdictions alike, such as Canada, Australia, Singapore and Switzerland.
For prosecutors, a DPA can be an attractive alternative to an indictmen t and a trial, potentially in all of the detection, investigation and enforcement stages. This is because the possibility to enter into a DPA can incentivise the corporate defendants to self-report and remediate potential misconduct, and to cooperate in the investigations in order to potentially lower any penalties. This is particularly relevant in the face of increasingly complex and international bribery cases, which present significant challenges to the prosecutorsâ limited resources. In relation to this, without exception, legislations introducing DPAs contemplates global resolution of cross-border cases, with the intention of facilitating joint investigations and negotiations with foreign authorities. This can, again, encourage companies to self-report and cooperate to avoid double jeopardy. Finally, with DPAs, prosecutors can impose more targeted measures to prevent recidivism and achieve the broader goal of reparation, through continuing oversight of the companiesâ remedi al efforts during the DPAâs duration. In US DPAs, it is common to see requirements of rigorous compliance reforms, tighter internal control measures and continued investigation support. Appointment of independent monitors to oversee the companyâs operations has also been a staple clause in DOJ and SEC DPAs with companies that have poor compliance structures, and is a possibility under UK and French legislations and other countriesâ proposed legislations.
Nevertheless, the jurisdictions that are newly adopting the DPA process are equally taking note of the criticism over the existing forms of corporate settlements in other jurisdictions, such as the Netherlands and the US. New or proposed legislations in these countries share a few common elements aimed particularly at heightening scrutiny over the instrument, and increasing accountability for the individuals allegedly involved in the wrongdoings.
First, in most of these jurisdictions, legislations would lim it the availability of DPAs to an exhaustive list of economic crimes such as bribery, corruption and fraud, among others. This list could be expanded to include other offences in the future, but this would require a legislative act.
Second, all newly adopted or proposed legislation include a substantial judicial review requirement. In the UK, the court should be satisfied that the DPA serves the âinterests of justiceâ and that its terms are âfair, reasonable and proportionateâ. The four UK judgments of DPAs published to date show that this requirement is taken seriously. This is a marked departure from the US practice, where DPAs are filed in federal court but the judgesâ authority involves limited review, and the prosecutors have been widely viewed as having unfettered discretion.
Third, unlike in the US and the Netherlands, newly introduced DPAs are often only available to legal entities, and not to individuals, in recognition of the strong deterrent impact that the threat of incarceration has on white-collar crime. Added to that, all authorities make clear that companiesâ provision of information about all culpable individuals would be considered an important part of their cooperation.
There are indications that the US authorities may also be responding to public criticism of DPAs. A few district court judgments in recent years have challenged the practice of limited judicial review, although overturned at the circuit court level. The DOJ, through the issuance of a 2015 memorandum titled âIndividual Accountability for Corporate Wrongdoingâ (the Yates Memorandum) has attempted to leverage corporations to help it pursue individuals. What sets the Yates Memorandum apart from its predecessors is the requirement that corporations must provide to the DOJ all relevant facts about the individuals involved in the corporate misconduct, to be eligible for any cooperation credit. It is also highlighted that the investigatio ns should focus on building cases against individual wrongdoers from the inception. Finally, although settlement is still an option for individuals, the Yates Memorandum specifies that corporate resolutions should not include an agreement to release culpable individuals from civil or criminal liability, absent extraordinary circumstances or approved departmental policy.
Requiring companies to provide facts about the individualsâ misconduct, while not allowing for a joint resolution with the individuals, could potentially present difficult dilemmas for companies. How can a company solicit information from an employee that will help its position in relation to the authorities, but is simultaneously likely to put the employee at risk of criminal or civil enforcement action, and do so while protecting the employeeâs rights? This is particularly challenging when at least part of the inculpatory information will find its source in notes of interviews with the said employee, prepared by the companyâs counsel during an internal investigation.
Interview notes would typically be protected under US and Dutch law by a valid claim of attorney-client privilege between the company and its counsel. In a litigation setting, this would reduce the likelihood of disclosure and, consequently, damage to the employee, but the situation could be different in case of settlement discussions. Though waiver of legal privilege is not a requirement for a DPA, the authoritiesâ increasing emphasis on disclosure of all materials, as well as of information about individuals, is likely to put a strain on the protection. Indeed, rewarding such waiver with sizeable cooperation credit is seen not only in US settlement practices, but also in the UK, where it seems to have been an important factor in granting an unprecedented 50 per cent discount on financial penalties in the Rolls-Royce DPA.
Such concerns are not entirely new. Corporate counsels have l ong employed disclaimers such as the US-inspired âUpjohn warningâ in investigative interviews as a way to avoid ethical conflicts of interest. The warnings consist of admonitions that:
- the lawyer represents the company and not the witness personally;
- the communication is protected by attorney-client privilege belonging exclusively to the company; and
- the company may choose to waive the privilege and disclose the communication to third parties.
However, in light of the exacting requirements of the Yates Memorandum, many practitioners have questioned the adequacy of the existing Upjohn warning, suggesting that a heightened warning should be given. Such warning would, for instance, expressly include that the communication may be shared with the government or that it may be used as evidence of individual wrongdoing to be reported to the enforcement authorities. At the same time, it is unclear how the authorities wo uld react to the foreseeable event that such an enhanced warning would chill the employeesâ cooperation in the internal investigation, consequently leaving the company with less information to provide.
Granted, the interests of corporations and individuals are inherently divergent to a certain extent, regardless of whether joint resolutions (through a DPA or otherwise) are available. Corporations must answer to a wider range of stakeholders, including employees and shareholders. This may justify the use of alternatives to trial or guilty pleas to minimise collateral consequences. However, individuals are, of course, often driven by their very individual interests. Because of this, they are under certain circumstances less prone to settle than corporations. Added to this is the individualised burden of proof in cases against individuals, which may be difficult to meet even if the company would have pleaded guilty or admitted to certain facts. This is because the individua lsâ misconduct will often involve an omission rather than a knowing or intentional violation of the law, which may not satisfy the mens rea required for a conviction.
The use of negotiated settlements such as DPAs will thus present novel issues for prosecutors and corporate defendants alike. However, settlements undeniably present significant advantages to both parties, especially in dealing with complex, cross-border cases. Therefore, the discourse should not be one of whether settlements are desirable or not, but of which form settlements should take in order to achieve the goals of criminal enforcement. A key challenge will lie in harmonisation, particularly as new jurisdictions are getting ready to share a piece of the settlement pie with countries with long established settlement regimes. On a positive note, these newcomers seem to have taken note of othersâ experiences and adopted a consistent approach to tackling existing criticism. Their experiences, in turn, may also inform the Dutch and US authorities in future settlements. Although different legal structures and cultures would undoubtedly result in some disparate treatment, it is hoped that the law and practice in various jurisdictions will develop in a predictable and harmonious manner suited for the modern day international anti-corruption enforcement.
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