The affairs of multi-national companies are coming under more and more scrutiny from investigative journalists, civil society organizations and prosecutors.
Like many of its counterparts, the Dutch Public Prosecutors Office (the OM) is increasingly coordinating with prosecutors in other jurisdictions. And these efforts have yielded some significant results.
In February, VimpelCom agreed to pay a total of US$795m to US and Dutch authorities after its Uzbek subsidiary admitted paying bribes in Uzbekistan to obtain telecom licenses and other benefits. The US Department of Justice (DoJ) has described this as a ‘landmark case.’ It is the sixth largest Foreign Corrupt Practices Act (FCPA) enforcement action in history.
With this headline grabbing case, the OM has sent a clear message to the business community—international companies based in the Netherlands (including those based there for tax or financing reasons) must adhere to Dutch anti-bribery laws when trading abroad.
The DoJ used the case to highlight its ambition to collaborate more with foreign counterparts in investigating corruption. Law enforcement in at least 11 countries assisted in the investigation in some way. And securities regulators in an additional nine countries assisted the Securities and Exchange Commission (SEC) in its related investigation.
In this briefing, we look at what this case means for the enforcement of foreign bribery laws, both in the Netherlands and internationally, and what companies need to know about how prosecutors are cooperating across borders.
The OM: one of many prosecutors stepping into the international arena
This is the first time the OM has published its press release in the English language. It clearly wanted to send a message that would reverberate beyond the Dutch border. It says:
‘Corruption is combatted internationally. This international approach signifies that corruption is not tolerated and that high penalties will be imposed. VimpelCom benefits from the favorable business climate in The Netherlands. The company must adhere to Dutch laws and regulations, also when trading abroad.’
VimpelCom, the world’s sixth largest telecoms group, has its origins in Russia. Since 2010, the group has been headquartered in Amsterdam. The group parent is incorporated in Bermuda and it is listed on NASDAQ. It has operations in several countries. The group therefore falls within the jurisdiction of a number of authorities.
Whilst the DoJ is well known in the international arena, for many the OM is something of an unknown quantity.
It is difficult for a company to estimate the liability it could face if it falls foul of Dutch anti-bribery laws given the OM has not published any sentencing guidelines for calculating penalties (unlike the DoJ). However, it is clear that the OM is not a light touch. In the past, the OM has agreed a $240m foreign bribery settlement with oil platform company SBM Offshore. And the Dutch portion of the VimpelCom settlement was nearly $400m ($230m fine and $167.5m disgorgement).
In determining the penalty, the OM took into account the length of time during which the bribery took place (nearly seven years) and the value of the bribe payments.
Interestingly, the OM press release refers to one other criterion for calculating fines. Namely, it should be ‘a punishment that hurts’. That, in itself, is a resounding warning to all companies falling within the OM’s jurisdiction to take Dutch foreign bribery laws seriously.
However, VimpelCom’s willingness to cooperate and provide its internal findings was also taken into account. As were its efforts to improve its compliance and the fact that the executives who had been involved, directly or indirectly, have left the company. So, whilst the benefits are difficult to quantify, some mitigation is available to companies that self-report and take steps to get their house in order.
As this settlement, once again, demonstrates, to address the risks of foreign bribery, companies must have adequate internal compliance systems in place for all subsidiaries, no matter their location.
Like the OM, the DoJ also gives companies credit for self-reporting and cooperating. On 5 April, the DoJ announced a one-year pilot program to encourage companies to self-disclose possible FCPA violations and cooperate with DoJ investigations.
Under that program, companies that self-report, cooperate with the DoJ and remediate their FCPA compliance failings may receive up to 50% off the usual lower end penalty as calculated using the United States Sentencing Guidelines.
Is this case a game changer?
In 2013, the OECD called into question the Netherlands’s commitment to tackling foreign bribery saying it was ‘failing to vigorously pursue foreign bribery allegations and must do more to enforce its foreign bribery laws.’ It has made similar comments about various other OECD countries within Europe and elsewhere.
According to Trace International, there were only four foreign bribery investigations ongoing in the Netherlands as at 31 December 2015. However, international businesses should be aware that the outcome of the VimpelCom investigation, and the wording of its press release, demonstrates the OM has prioritized this type of criminal investigation.
In addition, other prosecutors may look at this result as a shining example of what they can achieve when they collaborate with their law enforcement counterparts elsewhere. This may lead to a renewed appetite within various agencies to investigate foreign bribery. In the first quarter of 2016, the OM carried out raids at Shell headquarters in the Netherlands following a request from Italy in an ongoing corruption investigation in relation activities in Nigeria.
So the precise nature of a company’s foreign bribery risk will depend on a range of factors including its corporate structure, the geographic footprint of its operations, and its exposure to government work in jurisdictions with a weak record of combatting corruption. All this needs to be taken into account to determine how best to manage that risk.
Individuals also in the frame
In case of VimpleCom, the OM did not just focus on the corporate entities involved. It is also conducting criminal investigations into several individuals likely to have been involved. One Dutch national has already been arrested. And the OM announced that it will share information from its investigation with other countries, so individuals elsewhere can be prosecuted.
Directors of multi-national companies with corporate structures involving the Netherlands should be aware of OM's position on foreign bribery and its appetite for taking enforcement action in this area.
An international response to bribery
According to Trace International, 251 investigations concerning alleged bribery of foreign officials were being conducted by authorities in 27 countries as of December 31, 2015. Of these, 126 investigations were being carried out by US authorities and 101 investigations by European authorities.
The VimpelCom case, with the involvement of prosecutors or regulators from twenty countries, is a clear example of international cooperation in this area. But it is by no means the only example. Prosecutors have for years been working across borders and will continue to create ever closer ties. As Assistant Attorney General Leslie R Caldwell recently commented: ‘Collaboration and coordination among multiple regulators in cross-border matters is the future of major white collar criminal enforcement.’
The OM is obviously comfortable playing its part in that international cooperation and others may well follow in its footsteps.