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The European Legal Framework

The European Legal Framework

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The European Legal Framework

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  1. The European Legal Framework Combating CorruptionAn essential element of compliance in Europe Sascha Kuhn Simmons & Simmons 16 June 2010

  2. Overview 1. The OECD-Convention on Combating Bribery and Corruption - History, scope of application 2. Criminal conduct and legal consequences • The UK position • The Dutch position • The German position 3. Selected areas of concern • Facilitation payments, undue advantages, whistleblowing • Marketing, client hospitality and events

  3. 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

  4. 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

  5. 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)

  6. 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

  7. 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

  8. 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

  9. 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

  10. 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

  11. 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

  12. 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.

  13. 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.

  14. 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

  15. 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

  16. 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

  17. 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”)

  18. 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

  19. 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

  20. Contact details Sascha KuhnSimmons & SimmonsBreite Straße 3140213 DüsseldorfGermanyE: sascha.kuhn@simmons-simmons.comT: +49 (0)2 11–4 70 53-79