Hard jail time for a substantial period after violation EU sanction regulations

On 4 September 2017 the Den Bosch (Netherlands) Court (ECLI:NL:RBOBR:2017:4666) has sentenced a former managing director of a Dutch company to almost two years imprisonment, because he violated EU sanction regulations.

Case

The defendant is a former managing director of a Dutch company that had been trading with a company in Iran from October 2012 to February 2015. The Iranian company was listed on the EU “persons or entities involved in nuclear or ballistic missiles activities, and persons and entities that support the government of Iran” list. Under the EU sanction regulations, it is strictly prohibited to trade with persons or entities mentioned on this list. The EU sanction regulations (actually these were the pre JCPOA ones; JCPOA stands for ‘Joint Comprehensive Plan of Action’. The US plan of action securing that Iran uses its nuclear program for peaceful means only) against Iran obviously result from the concerns within the international community about the Iranian nuclear weapons program.

The Dutch company forged documentation related to the trade with the Iranian company. An investigation by Dutch customs however revealed the prohibited transactions. The Den Bosch Court concluded that the former managing director deliberately ignored the sanction regulations, whereby he only had the financial gain of his own company in mind. The Court sentenced him to 20 months imprisonment, of which 4 months on probation with a probationary period of 2 years. The Court specifically argued that with a view to proper law enforcement, another or lower punishment than this prison sentence was not sufficient.

EU sanctions regime

Sanction regulations aim to maintain or restore international peace and security, to support international legal order and/or to fight terrorism. The EU website provides a regularly updated listing of  the individuals, entities or countries that are subject to sanction regulations. The enforcement of the EU sanction regulations is left to the member states. In the Netherlands, the prosecution and enforcement of the EU sanction regulations has its legal anchorage in the Sanctions Act 1977 (“Sanctiewet 1977”). The violation of these sanctions is punishable under the Economic Offences Act (“Wet op de Economische Delicten”).

The export of certain products and services can endanger the international security. Strategic goods and services as follows are therefore controlled for export from the EU: 

  • “Military goods” - products that are specially designed or modified for military use and their components, associated technology and software (for example tanks, guns and ammunition).
  • “Dual use goods” – products that can be used for civil or military purposes and which meet certain  specified technical standards and some of their components, associated technology and software (for example certain flame retardants are used in the construction industry but can also be used as a precursor for poison gas).
  • “Strategic services” – repairs and maintenance of military or dual use goods and instructions for the use thereof. Certain software deliveries also fall within strategic services.

Trade in these categories of goods and technology are regulated by several treaties and international agreements. In the Netherlands, these provisions are implemented in our legislation by means of the Strategic Goods Decree (“Besluit strategische goederen”), the Strategic Services Act (“Wet strategische diensten”) and the Chemical Weapons Treaty Implementation Act (“Uitvoeringswet verdrag chemische wapens”). The export of strategic goods and services is not or only permitted under certain conditions. In many cases an authorization from the Foreign Affairs Office (delegated to customs to a certain extent) or notification to this Office is required. Also the violation of these regulations is sanctioned by the Economic Offences Act.

According to the Economic Offences Act, the potential penalty for negligently violating the EU sanctions regulations or the regulations regarding strategic goods and services is an imprisonment of one year, community service or a fine up to € 20.500,-. In case the violation was intentional, the potential penalty is an imprisonment of six years, community service or a fine up to € 82.000,-. The Economic Offences Act in conjunction with the Dutch Criminal Code (“Wetboek van Strafrecht”) provides for an increase in the fine if the value of the goods involved in the offence exceeds the amount of € 20.500,-. In that case a fine up to € 82.000 can be imposed for negligent violations and a fine up to € 820.000,- for intentional violations. Article 23 of the Dutch Criminal Code furthermore provides that legal entities can be fined with higher amounts (under circumstances up to 10 % of the annual turnover) if the fine specified for the criminal offence does not provide an appropriate punishment.

Article 51 of the Dutch Criminal Code provides that if the violation is committed by a legal entity, the punishments may not only be imposed on the legal entity but also on those persons who have ordered the commission of the criminal offence and on those persons who actually directed the unlawful acts.

Implications of this judgment 

The question remains whether traders are fully aware of the abovementioned regulations and the adverse implication non-compliance can have on their business and personal life. In case traders are aware of the sanction regime and export control regulations, they often appear under the impression that the actually imposed sanctions will most likely not be really severe. The judgment of the Den Bosch Court shows that the consequence is not just a mere slap on the wrist, but hard time in jail for a substantial period of time. Violation of the EU sanction regulations needs to be taken very seriously and can be severely punished. The former managing director in the matter concerned will probably appeal the judgment. We need to await the subsequent judgment of the Court of Appeal. Whatever the outcome of the proceedings in appeal may be, it is in any case time to realize that severe penalties can be imposed. And as they say, forewarned is forearmed!

Marc Padberg, Jikke Biermasz and Lisa van Vliet, Attorneys at law Trade, Industry & Logistics department