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  • Compliance & Business Integrity
  • 06-09-2017

On Monday 4 September, the Oost-Brabant District Court sentenced (only available in Dutch) a defendant to a prison term of 20 months for being the de facto person directing illegal trading with an Iranian party. The court dismissed his defence that he did not know that the intermediaries would forward the items concerned to the Iranian party. After all, there were sufficient indications and the defendant failed to investigate them.

The defendant’s company was alleged to have indirectly supplied replacement parts for engines to a sanctioned Iranian party (NIGC) between 2012 and 2015. NIGC was in fact run by the Iranian government and was allegedly involved in Iran’s nuclear weapons programme. It was precisely that programme that led to the Iran sanctions and to sanctions being imposed on NIGC (from mid-October 2012). The sanctions prohibit the supply of “economic resources” to the Iranian party. That prohibition covers anything that represents an economic value, so including the aforementioned goods used to replace defective parts.

The defendant argued that deliveries were made to parties in Dubai and Turkey and that he did not know that the goods were destined for the Iranian party. However, correspondence between the defendant and the intermediaries referred to the unique numbers of engines belonging to the sanctioned party. In addition, the correspondence asked whether the goods could be delivered directly to Tehran and the abbreviated name of the sanctioned party appeared in e-mails. The court also explicitly took into account the fact that the company had previously been fined for illegal trading with Iran. According to the court, it was therefore sufficiently clear to the company and the defendant that trade was being conducted with that sanctioned party; there was therefore, at the very least, an obligation to investigate what (or whom) the goods were actually intended for. That obligation had not been complied with.

The court found that the defendant had been the de facto person directing the violations of the (Dutch) Sanctions Act [Sanctiewet]. It also counted strongly against him that he had violated the sanctions for years solely for financial gain. Based on the estimated harm done (a total of EUR 500,000 for the seven export shipments) and the standard points for determining the sentence, the court came to a sentence of 20 months imprisonment, of which four months were suspended for two years.

This case once more makes clear how very important it is to carry out sufficient investigation in the case of trade in sanctioned countries or with parties in those countries, as well as when sanctioned products and projects are concerned, including in the case of onward supply. Signals and ambiguities must not be ignored. In practice, it is often thought or assumed that trading through an intermediary means that responsibility then ceases and that no further investigation is needed. But the use of an intermediary does not release the other parties in the chain from their own responsibilities in this regard. In all cases, the higher the risk, the more investigation and measures are expected to be implemented, and signals must be responded to. Sometimes, the question is whether it is still possible (or permissible) to trade at all (see our blog about the recent onward supply of gas turbines to Crimea). The ruling by the Oost-Brabant District Court is also a good reminder for directors and de facto managers that there are circumstances when it is not only the company that runs the risk of criminal prosecution!

If you want to know more about sanctions, about how to carry out a sanctions check, or about structuring your compliance procedures, don't hesitate to contact us. 

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