Netherlands

Netherlands Corruption Report

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Snapshot

Netherlands_249x162.jpgCorruption does not represent a significant constraint to business in the Netherlands. Petty corruption is almost non-existent, and the public administration is transparent, efficient and holds itself to high ethical standards. The Dutch Penal Code makes it illegal for anyone to give or receive a bribe in the public or private sector, including a foreign public official. Dutch and foreign companies and their subsidiaries can be held liable for corruption offenses committed by individuals working on their behalf and can be ordered to pay up to 10% of their turnover. Facilitation payments are not permitted, while gifts and hospitality may be considered illegal depending on the intent and benefit obtained. The legal framework to fight corruption generally complies with the provisions of the major anti-corruption conventions. According to the OECD, The Netherlands has made significant progress in investigating and punishing foreign bribery since it criticized the country for lagging enforcement in 2013.

Last updated: November 2017
GAN Integrity

Judicial System

European_Commission.svg.pngThere is a low risk of corruption in the Netherlands. Companies consider the judiciary very independent and effective in settling disputes and challenging government regulations (GCR 2017-2018). Three-quarters of citizens consider the degree to which the judiciary is independent as either good or very good (ECJS 2017). No citizens report paying bribes to the courts (European Commission, Feb. 2014). Judges express confidence that appointments and promotions in the judiciary are based on merit (ENCJ 2017). Only very few judges express concerns about facing inappropriate pressure in their work (ENCJ 2017). The Enterprise Chamber, a special court established and dedicated to commercial disputes, is well-renowned among investors (ICS 2017). Settling disputes in the Enterprise Chamber takes an average of 3 to 12 months (ICS 2017). While the Netherlands ranks highly when it comes to legal certainty, there are concerns about financial cutbacks and incoherent reforms in the judiciary, sometimes leading to the weak application of administrative-law criteria (SGI 2016). Fees required to start legal procedures have been significantly raised, making it unaffordable for smaller companies to access legal dispute resolutions (SGI 2014). Enforcing a contract in the Netherlands takes slightly less time but is slightly costlier than the OECD high-income average (DB 2017).

The Netherlands is a member of the International Centre for Settlement of Investment Disputes (ICSID) and is a signatory to the New York Convention 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Police

There is a low risk of corruption when dealing with the Dutch police in day-to-day operations. More than one-third of citizens perceive corruption and abuse of power as widespread in the police forces, but respondents do not report paying bribes to police officers (European Commission, Feb. 2014). The government has effective mechanisms to investigate and punish police abuse and corruption; impunity is not an issue (HRR 2016). The reliability of police services to protect companies from crime is considered very high (GCR 2017-2018).

A number of corruption cases in the police emerged in 2016; one case involved a police officer accused of selling confidential information on a large scale, earning him almost EUR 118,000 (TI Netherlands, Aug. 2016). Another case involved an officer who allegedly ran a criminal network from inside the police (TI Netherlands, Aug. 2016). The aforementioned two officers are due to appear in front of a judge in 2017 (TI Netherlands, Aug. 2016). The National Police is undertaking a large-scale study of corruption within the police force (BNR, Feb. 2017).

Public Services

The Dutch public administration does not pose any significant corruption risks for companies. The integrity of service provision throughout the public administration is very high, with very few reported incidents of corruption between citizens, businesses and public authorities (EUACR 2014). Companies report that irregular payments and bribes almost never occur when obtaining public utilities, business permits, licenses and other related services (GCR 2015-2016; European Commission, Feb. 2014). Companies, however, complain of burdensome government bureaucracy (GCR 2017-2018).

Starting a business in The Netherlands takes four steps, which is in line with other OECD high-income countries; the time required is only half of the average (DB 2017). The steps and time required to obtain a construction permit are in line with the OECD high-income average (DB 2017).

Land Administration

There is a moderate to low risk of corruption in the land administration; risks are particularly related to the real estate sector. Very few surveyed companies report that bribery is used when obtaining building permits (European Commission, Feb. 2014). Property rights are well protected (GCR 2017-2018). Expropriation or nationalization require a special act of parliament and The Netherlands generally follows customary international law, resulting in prompt, adequate, and effective compensation as well as ample process for legal recourse (ICS 2017). While companies are not likely to encounter corruption when dealing with the Dutch land authorities, findings reveal that the building and real estate sectors are more vulnerable to corrupt practices (Transparency International, Nov. 2015). In the past decade, a number of high profile corruption cases have come to light in the country involving real estate agencies and housing corporations involving embezzlement and kickbacks among other issues (Transparency International, Nov. 2015). Various industry associations have adopted codes of conduct in response to the problem (Transparency International, Nov. 2015).

Law enforcement agencies have started an inquiry into Schiphol Airport’s real estate business following allegations that three of its employees engaged in a kickback and embezzlement scheme worth millions of euros in which they would write invoices for repairs that never took place (Volkskrant, Aug. 2017). It is alleged that a number of other real estate agents were involved in the scheme (Volkskrant, Aug. 2017). The investigation into the allegations was ongoing at the time of review.

Tax Administration

The Dutch tax administration is not affected by corruption and does not constitute a constraint for investors. Companies indicate that bribes and irregular payments are almost never exchanged when meeting with tax officials (GCR 2015-2016). Likewise, citizens perceive the tax administration to be free from corruption and abuse of power (European Commission, Feb. 2014). While tax regulations and tax rates are considered a problematic factor to doing business (GCR 2017-2018), tax authorities provide a high degree of customer service to foreign investors in the form of transparent and precise guidance regarding long-term tax obligations (ICS 2017). Companies should note that Dutch law prohibits the tax deductibility of bribes and facilitation payments (OECD, May 2015). The Dutch tax administration is considered almost free from corruption and abuse of power by citizens (European Commission, Feb. 2014).

The number of annual tax payments required in the Netherlands is slightly lower than the OECD high-income average, and the time required is significantly lower than the average (DB 2017).

Customs Administration

Corruption risks in the Dutch customs administration are low. Bribes and irregular payments are very rare (GETR 2016). More than one-third of citizens consider the customs administration to be affected by corruption and abuse of power, but survey respondents do not report paying bribes to customs officials (European Commission, Feb. 2014). Burdensome procedures and tariffs are among the main constraints for importing and exporting in the Netherlands (GETR 2016). Businesses rate the efficiency and time-predictability of the clearance process very highly (GETR 2016). The costs and time required for border compliance in The Netherlands are almost negligible (DB 2017).

A customs agent was sentenced to 14 years of imprisonment for cooperating with criminals to clear large amounts of cocaine through the port of Rotterdam (NRC, Jul. 2017). The agent was found to have earned a kickback of 7,5 percent of the street value of the drugs (NRC, Jul. 2017).

Public Procurement

There is a moderate to low risk of corruption in the procurement sector. Companies perceive diversion of public funds to be very rare and favoritism in decisions of government officials is seen as uncommon (GCR 2017-2018). However, around one-fifth of businesses believe that corruption has prevented their company from winning a public tender in the past three years (European Commission, Feb. 2014). The Netherlands is ranked among the best countries in the EU in its ability to develop mechanisms to control corruption in public procurement (European Commission, Feb. 2014). While procurement corruption does not impede doing business in the country, risks of corruption are reportedly largest in the construction sector and real estate sector (Transparency International, Nov. 2015). It is recommended for businesses to implement special due diligence procedures to reduce the likelihood of encountering corruption in the procurement process.

National Railways operator NS was fined EUR 40 million for collusion and fraudulent practices in the bidding process for a railway concession in the southern province of Limburg (Volkskrant, Jun. 2017). One of the members of the board of directors of competitor Veolia was reportedly bribed to give essential information (Volkskrant, Jun. 2017). NS’s director was ultimately not prosecuted since the investigation did not find a ‘leading role’ for the director (Volkskrant, Jun. 2017). Corruption allegations have been made in the procurement of vehicles for the Ministry of Defense and police force (Trouw, Jun. 2017). A dozen employees at both organizations are being prosecuted for accepting gifts from a number of car suppliers worth a total of EUR 100,000 over the course of a decade (Trouw, Jun. 2017). One of the car suppliers gained an advantage worth EUR 6 million in return for the gifts (Trouw, Jun. 2017).

Legislation

The Dutch Penal Code makes it illegal for anyone to give or receive a bribe in either the public or private sector, as well as bribing a foreign public official. It criminalizes extortion, abuse of office, fraud and money laundering. Dutch and foreign companies and their subsidiaries can be held liable for corruption offenses committed by individuals working on their behalf. There is a dual criminality requirement; meaning that the offense has to also be criminalized in the country where it took place, before it may be prosecuted by Dutch authorities (CMS 2016). There exists no corporate liability defenses which could mitigate sentencing (CMS 2016). Individuals can be fined up to EUR 78,000 and/or sentenced with up to six years imprisonment; and a maximum sentence of twelve years for the bribery of judges (OECD, May 2015). The maximum corporate fine possible is 10% of the given organization’s annual turnover (CMS 2016). Private bribery is also criminalized, but the maximum sentence is only four years (CMS 2016). The government has effectively enforced its anti-corruption laws, and the country has stepped up its efforts in investigating and prosecuting foreign bribery cases (OECD, May 2015). Dutch law does not distinguish between bribes and facilitation payments, and bribes do not have to be of monetary value, but encompass material and immaterial benefits for the recipient (The Law Reviews, Jan. 2017). Facilitation payments are not prosecuted on the condition that these only represent small amounts, do not distort competition, are provided at the initiative of the foreign official, represent payments to junior public officials, and are included in the company’s financial accounts (OECD, May 2015). Protection for whistleblowers is not guaranteed by a single law, but a new agency called the House for Whistleblowers (Huis voor Klokkenluiders) has been set up in 2016. Whistleblowers may turn to the house for advice and assistance; the house may also conduct its own independent investigation into any complaint (WLG 2016). The House for Whistleblowers bill (in Dutch) has also introduced an obligation for companies to introduce an internal policy for dealing with reports of abuse and misconduct (WLG 2016).

The Netherlands is a signatory to the OECD Anti-Bribery Convention, the United Nations Convention Against Corruption (UNCAC), the Council of Europe’s Civil and Criminal Law Conventions against Corruption, and the Group of States Against Corruption (GRECO).

Civil Society

The Dutch media environment is free and independent, a wide range of views is expressed, and censorship is very rare (HRR 2016). The government rarely interferes in the press and does not restrict or censor online content, except for illegal content (FotP 2016). The Government Information Act allows individuals and the press to demand information from the public administration or from private companies conducting work for a public body; the government generally respects the law, but court disputes over the application of the law occasionally arise (HRR 2016). The Dutch media environment is considered ‘free’ (FotP 2017).

Freedom of assembly is guaranteed and generally respected by the government in practice (HRR 2016). Many national and international civil society organizations (CSOs) are registered in the Netherlands and enjoy a high degree of independence (NISA 2012).

Sources

The site provides a wealth of practical anti-corruption resources to support a solid preventative approach, covering subject such as processes, due diligence, practical tools to support compliance program implementation and also compliance and integrity training.

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