THE BOTTOM LINE
- Profits from criminal acts are subject to confiscation. A Dutch court has ordered a company convicted of violating the Nature Conservation Act to pay over €55,000 in illegally obtained profits to the state.
- Only direct costs are deductible from illegal revenue. When calculating forfeitable profits, courts will only deduct expenses directly and necessarily linked to the criminal offense. General business overhead, such as salaries and rent, cannot be used to reduce the amount.
- “Inability to pay” is a difficult defense. Arguing that the company lacks the financial capacity to pay the forfeiture amount is unlikely to succeed unless it can be proven that there is no realistic prospect of future earnings.
THE DETAILS
This case serves as a crucial reminder of the financial consequences that follow a corporate criminal conviction in the Netherlands. A company previously found guilty of intentionally violating the Dutch Nature Conservation Act for illegally importing a large shipment of Ipé hardwood from Suriname faced a secondary legal action from the Public Prosecutor. The goal was not further punishment but the disgorgement, or “clawback,” of all profits generated from the illegal transaction. This procedure ensures that entities cannot financially benefit from their unlawful activities.
The central legal debate focused on how to calculate the “illegally obtained advantage.” The court started with the prosecutor’s initial calculation of nearly €83,000 in net profit. However, it then considered the company’s argument that certain business costs should be deducted. The court applied a strict standard: only costs that are in a direct and necessary relationship to the completion of the crime can be subtracted. In this instance, the court allowed deductions for specific, provable expenses, including freight-on-board and wood planing costs, as they were directly tied to the illegal shipment.
Crucially, the court affirmed the established legal principle that indirect or general overhead costs are not deductible. Expenses like salaries, office rent, and administrative costs must be paid by a business regardless of its engagement in illegal activities and therefore cannot be used to shield illicit profits from forfeiture. The company also attempted to argue that it lacked the financial capacity to pay the forfeiture amount, but this defense was swiftly rejected. The court noted that such arguments are generally reserved for the enforcement stage and only succeed in court if a company can demonstrate a total and permanent inability to pay, which is a very high bar. After adjusting for the allowable direct costs, the court set the final forfeiture amount at €55,660.81.
SOURCE
Source: Rechtbank Overijssel
