The European Legal Framework
Combating Corruption
An essential element of compliance
in Europe
Sascha Kuhn
Simmons & Simmons
16 June 2010
Overview
1. The OECD-Convention on Combating Bribery and Corruption - History, scope
of application
2. Criminal conduct and legal consequences
a) The UK position
b) The Dutch position
c) The German position
3. Selected areas of concern
a) Facilitation payments, undue advantages, whistleblowing
b) Marketing, client hospitality and events
© Simmons & Simmons 2008
2 /
Doc ID: L_LIVE_EMEA2:4254470v1
© Simmons & Simmons 2008
3 /
Doc ID: L_LIVE_EMEA2:4254470v1
1. The OECD Convention
 OECD Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions 1997
 No direct effect/functional equivalence
 Criminalises bribes to foreign public officials
 Mutual assistance
 Israel: Signatory of the Convention, OECD member since 27 May 2010
© Simmons & Simmons 2008
4 /
Doc ID: L_LIVE_EMEA2:4254470v1
2. a) UK - Criminal conduct and legal consequences
 The Bribery Act 2010 – Key Points to remember:
–
Consolidates previous law covering both UK and foreign officials, as well as
private individuals;
–
Extra-territorial jurisdiction provided there is a connection with the UK;
–
Promotional expenditure may amount to bribery of a foreign official;
–
Separate corporate offence;
–
‘Adequate procedures’ defence to the corporate offence under section 7;
–
Consent and connivance offence for senior officers of the body corporate;
–
No facilitation payment carve out;
–
Likely to come into force following the UK general election with the
corporate offence following in October 2010
© Simmons & Simmons 2008
5 /
Doc ID: L_LIVE_EMEA2:4254470v1
2. a) UK - Money laundering offences
Key offences under the Proceeds of Crime Act 2002:

Concealing, disguising, converting, transferring criminal property or removing criminal
property from the UK (S327)

Entering into or becoming concerned in an arrangement which a person knows or
suspects, facilitates (by whatever means) the acquisition, retention, use or control of
criminal property by or on behalf of another person (S328)

Acquisition, use and possession of criminal property (S329)

Failure to disclose knowledge or suspicion of money laundering (regulated sector) (S330)

Tipping off any person in a way which could prejudice any investigation into money
laundering (S333)

Prejudicing an investigation (S342)

Destroying or disposing of relevant documents

Failing to comply with a disclosure/customer information order (S359/S366)
© Simmons & Simmons 2008
6 /
Doc ID: L_LIVE_EMEA2:4254470v1
2. a) UK - Money laundering offences
Proceeds of Crime Act 2002 (cont)
 “Criminal property”:
–
Property that constitutes or represents a person’s benefit from criminal
conduct; and
–
Alleged offender knows/suspects it constitutes/represents such a benefit
 “Criminal conduct”: conduct which constitutes
–
An offence in any part of the UK or
–
Would constitute an offence in the UK if it occurred there
 Defence if have made authorised disclosure and have State consent to proceed
© Simmons & Simmons 2008
7 /
Doc ID: L_LIVE_EMEA2:4254470v1
2. b) Netherlands - Overview
 Dutch national corrupt practices legislation (Dutch Criminal Code)
 Bribery of public officials
–
Active: Sections 177 and 177a
–
Section 178: Bribery of a judicial officer
–
Passive: Sections 362, 363, 364
 Non-public bribery (agents, consultants, etc.)
–
Active: 328ter subsection 2
–
Passive: 328ter subsection 1
 Guidelines Dutch Public Prosecutor’s Office: Guidance
© Simmons & Simmons 2008
8 /
Doc ID: L_LIVE_EMEA2:4254470v1
2. b) Netherlands – Penalties and Offences
 Penalties can include:
–
Imprisonment up to 12 years
–
Fines up to EUR 76,000.00 (legal persons: EUR 760,000.00)
–
Deprivation of certain rights
–
Confiscation of proceeds of crime
© Simmons & Simmons 2008
9 /
Doc ID: L_LIVE_EMEA2:4254470v1
2. b) Netherlands - “Foreign” jurisdiction Netherlands
 Active bribery
–
Dutch nationals bribing (foreign) public officials abroad (including those
working for international institutions)
–
Non-Dutch nationals bribing public officials from abroad
– Offence committed against a Dutch public official
– Offence is considered a criminal offence in the country concerned
 Passive bribery
–
Public officials working for the Dutch government accepting bribes abroad
(including non-Dutch personnel)
–
Public officials working for an international institution with its seat in The
Netherlands (including non-Dutch personnel)
–
No dual criminality is needed
© Simmons & Simmons 2008
10 / Doc ID: L_LIVE_EMEA2:4254470v1
2. b) Netherlands – OECD Comparison
 Dutch legislation complies with the OECD Convention:
–
Broad definition of bribery
–
Criminalization of associated offences
–
Active and passive bribery are predicate offences for money laundering
–
Criminal liability for legal persons and corporate leaders
–
Confiscation of proceeds of crime is possible
–
Broad jurisdiction
–
Broad statutory limitation period (6 to 12 years)
–
Mutual legal assistance and extradition are possible
© Simmons & Simmons 2008
11 / Doc ID: L_LIVE_EMEA2:4254470v1
2. b) Netherlands – OECD Comparison (cont.)
 In addition to the OECD Convention, the Dutch Criminal Code criminalizes
–
Active bribery of domestic public officials
–
Passive bribery by domestic and foreign public officials
–
Non-public bribery
 Unlike in the OECD definition of bribery, Dutch Criminal Law does not relate the
act of bribery to the goal of obtaining or retaining business or any other
improper advantage in the conduct of international business
© Simmons & Simmons 2008
12 / Doc ID: L_LIVE_EMEA2:4254470v1
2. b) Netherlands - Legislative changes penalty clauses
 On 1 April 2010, Section 177 Sr, Section 177a Sr and Section 178 Sr were
amended so as to incorporate a third subsection. Pursuant to this new
provision, a person committing an offence as described in these Sections in the
course of his profession, may be disqualified from practicing such profession.
 On the same date, the first subsections of Section 177a Sr and Section 178 Sr
were amended. Since 1 April 2010, the maximum punishment has been
increased to a fine of the fifth category.
 Also, Section 328ter Sr was amended on 1 April 2010. Since 1 April 2010, the
maximum punishment has been increased to two years' imprisonment or the
imposition of a fine of the fifth category.
© Simmons & Simmons 2008
13 / Doc ID: L_LIVE_EMEA2:4254470v1
2. b) Netherlands - Legislative changes fine categories
 Fifth category:
–
If the breach was committed between 1 January 2008 and 1 January 2010,
the maximum fine is EUR 74,000;
–
If the breach was committed after 1 January 2010, the maximum fine is
EUR 76,000.
 Sixth category:
–
If the breach was committed between 1 January 2008 and 1 January 2010,
the maximum fine is EUR 740,000;
–
If the breach was committed after 1 January 2010, the maximum fine is
EUR 760,000.
© Simmons & Simmons 2008
14 / Doc ID: L_LIVE_EMEA2:4254470v1
2. c) Germany - Overview
 Particular attention of tax authorities to manner in which payments are made,
for example to off-shore/number accounts (even if in line with foreign customs)
 Deductibility for tax purposes causes problems if financial significance of
transaction is not reflected in the documentation, therefore precise and
adequate description of intermediary’s duties
 Time and effort for drafting contract and documenting transaction must be in
healthy balance to its significance, i.e. no “napkin solutions” for high volume
transactions
 Out-of-pocket expenses only up to a certain limited and socially adequate, e.g.
EUR 10,000.00 for entertaining 5 business partners far too excessive
© Simmons & Simmons 2008
15 / Doc ID: L_LIVE_EMEA2:4254470v1
2. c) Germany - Offences
 Bribery in the private sector, section 299 et seqq. German Criminal
Code
 Granting of advantages and bribery of officials, section 331 et seqq.
German Criminal Code
– German criminal law also includes foreign officials and judges as
well as employees of European institutions
 Breach of trust, section 266 German Criminal Code
 Money Laundering, section 261 German Criminal Code
© Simmons & Simmons 2008
16 / Doc ID: L_LIVE_EMEA2:4254470v1
2. c) Germany - Possible consequences
 Criminal consequences Criminal consequences
– No criminal liability for corporations (yet), but high company fines,
loss of reputation
– Confiscation of acquired benefits
– Personal liability up to 10 years imprisonment or fine
 Economic consequences
– “Black list” for public contracts
– Loss of export insurance cover
© Simmons & Simmons 2008
17 / Doc ID: L_LIVE_EMEA2:4254470v1
2. c) Germany - Tax
 No deductibility of payment against taxes as “useful expenditure”
 Tax inspectors report to public prosecutors where certain identifying
factors are present, e.g. disproportionally high remuneration, no/too
much documentation, payment into off-shore accounts or in cash
(“Smell Test”)
© Simmons & Simmons 2008
18 / Doc ID: L_LIVE_EMEA2:4254470v1
3. a) General Areas of Concern
 Facilitation payments
–
Prohibited
 Undue advantage
–
No strict definition
–
Intention of the payment, size & value
–
Relationship person giving and person receiving
–
Effect of the advantage/impact on public organization
 Whistleblower
–
Dutch Corporate Governance Code: protection of employment position for
whistleblowers
–
No specific provision protecting whistleblowers from prosecution
© Simmons & Simmons 2008
19 / Doc ID: L_LIVE_EMEA2:4254470v1
3. b) Marketing, Client Hospitality and Events
 Except for the UK generally acceptable, be alert where officials involved. In the
UK, extra vigilance required
 Plain sailing
– Small/insignificant allocations (small business gifts, lunch invitations)
– Presentation of product
 Grey area
– Expensive business gifts: acceptable if obviously related to product and not
useful for recipient in private sphere
– Presentation of product with excessive entertaining schedule
– Donation and sponsorship
 In doubt: Newspaper test
– Would this be a story for the press? If not, presumption of legality
© Simmons & Simmons 2008
20 / Doc ID: L_LIVE_EMEA2:4254470v1
Contact details
Sascha Kuhn
Simmons & Simmons
Breite Straße 31
40213 Düsseldorf
Germany
E: sascha.kuhn@simmons-simmons.com
T: +49 (0)2 11–4 70 53-79
© Simmons & Simmons 2008
21 / Doc ID: L_LIVE_EMEA2:4254470v1
© Simmons & Simmons 2008
22 / Doc ID: L_LIVE_EMEA2:4254470v1
simmons-simmons.com
elexica.com
© Simmons & Simmons 2008
23 / Doc ID: L_LIVE_EMEA2:4254470v1