Country Report: A Storm in a Teacup or Dark Clouds on the Horizon

Publicatie EFFL

Country Report Netherlands - EFFL 04/2015
A storm in a teacup, or dark clouds on the horizon?
 
Buzz in the Netherlands: changes in fines Dutch Commodities Act
The Dutch Commodities Act (DCA) is currently subject to major changes. The maximum administrative fine for violating the Dutch Commodities Act is currently €4.500 per separate violation. Most recently, the Senate adopted a legislative proposal which raises the maximum administrative fine to €810.000 per separate violation. A multiplication by factor 180 (!). This article zooms in on the who, what, when, where and why of the changes in the DCA.
 
The intended purpose of this change: insight in the legislative procedure
Initially, the original proposal intended to raise the administrative fines from €4.500 to € 78.000 per violation. Most important reason for this proposal: the recent changes in the height of fines imposed based on the Social Affairs and Employment Act. The Social Affairs and Employment Act is (closely) related to some subjects in the DCA. Therefore, it would seem logical to equalize the height of the fines. However, the original proposal declared the new fine applicable to (nearly) all violations of the DCA. During the legislative procedure, the focus changed to food and product safety as a justification for the overall raise of the fines. The documents in the legislative procedure refer to the recent (Dutch) food scandals, such as the fish and horse meat issue. The initial reason for the changes of the DCA seemed to slip into the background, while the protection of food safety became more and more prominent. 
 
A sudden (and dramatic) increase in fines…
Due to the aforementioned developments during the legislative procedure, also the height of the proposed administrative fine increased. The House of Representatives agreed that the maximum fine of €81.000 would (still) not have precautionary effect on large companies. Consequently, another amendment was adopted in order to raise the maximum from the fifth category (€81.000) to the sixth category (€810.000). A significant change. This change will be incorporated in article 32a, paragraph 2 DCA. The new proposal was accepted by the Senate on 19 May 2015. When the changes will take effect, will be decided by Royal Decree.
 
.. and a justification for these changes
The Parliamentary Papers clarify that the highest administrative fines are only aimed at cases of severe fraud or deception and require an element of intent or gross negligence of the offender. From this information follows that the fines that belong to ‘lighter’ violations of the DCA may remain unchanged.
 
According to the new article 32b, paragraph 1 DCA, next step is that an annex to DCA should be established by order in council. This annex lists all articles of the DCA that constitute a prohibition, and a corresponding (maximum) administrative fine. Most certainly, the maximum fine per violation will not exceed the maximum of €810.000. In the current version of the DCA, a similar annex exists. New in the prospective DCA is that the height of the fines can be partly based on i) the amount of employees, ii) the degree of culpability or iii) the (partial) turnover of the company. Summarizing: the height of the maximum fines is increased by a factor 180, but the exact fine that will be imposed, will be calculated based on the characteristics of the specific situation. Generally, a governmental decree can be implemented autonomously, but the newly adopted article 32b, paragraph 2 DCA requires the previous consultation of the Parliament, the so-called (soft) preliminary scrutiny procedure. This addition was proposed (and adopted) due to the fact that some elements of the new higher fines – such as the percentage of the turnover that will be used to calculate the fine – are still uncertain. It is therefore desirable that the governmental degree is laid before the full Parliament.
 
Reference to Economic Offences Act: criminal fines
Another change in the DCA is the reference to criminal fines, based on the Economic Offences Act, that can be applied in case of severe violations of the DCA. In some situations, a criminal sanction is more appropriate than an administrative fine. Criminal fines can be applied i) in case of wilful or reckless acting that constitutes a danger to human health or safety, or ii) when the height of the administrative fine is exceeded by the benefits of violating the DCA.
 
Conclusion: huge change, but only a real threat to ‘true bad boys’
There is no doubt that the maximum fine of violating the provisions mentioned in article 32a paragraph 1 DCA, will be increased to €810.000. The exact fine that can be applied in specific cases should be determined based on the order in council, which still needs to be formulated. We anticipate that the changes in the law (although accepted by the Senate) will not take effect before the order in council is composed. Most important reason: only the order in council decides in which situations the highest fine are to be imposed. We assume that, due to the preliminary scrutiny procedure and the uncertainty of the calculation of exact fines, this may take some time. Based on the information of the Parliamentary Papers, the honest local grocery probably shouldn’t fear the worst, unlike (large) companies with questionable intentions.
 
Ebba Hoogenraad and Sarah Arayess