16 December 2019

Probity screening (Bibob) Act increasingly applied to environmental permit applications

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The Public Administration (Probity Screening) Act – known in the Netherlands as the "Bibob Act" – was originally created to prevent the government from inadvertently facilitating criminal activities through the granting of permits, subsidies or public contracts. However, public bodies increasingly – and sometimes even automatically – apply this probity screening legislation to bona fide companies with entirely regular activities, for example, in application procedures for the granting or revising of environmental permits. This process is time-consuming and can impact when and under what conditions a permit may be granted, even where there is no risk of unintentional facilitation of criminal activities. In practice, the Bibob Act seems to be applied in a different and broader way than originally intended. Companies applying for the granting or revision of an environmental permit should be aware of this and take into account the potential consequences for the duration or outcome of the application process.
The Bibob instrument The Bibob Act gives administrative bodies the power to refuse or revoke a permit, subsidy or public contract if there is a serious risk that it will be used for money laundering or to commit criminal offences, including offences for which an administrative fine can be imposed. To this end, the relevant administrative body may ask the National Public Administration Probity Screening Agency (also known as the National Bibob Agency) to advise on the risk of abuse. To do so, the National Bibob Agency has access to information from a large number of sources, including police and judicial documents, and tax data. On the basis of these data, the National Bibob Agency assesses whether there is a "serious danger", a "lesser degree of danger" or "no danger" that the permit will be used to:
  • make use of cash-valuable benefits obtained, or to be obtained, from committed offences; or
  • commit criminal offences.
In most cases, the National Bibob Agency finds that there is either a serious or lesser degree of danger of such abuse. It is then up to the administrative body to determine whether any consequences should be drawn from this. In the event of "serious danger", the administrative body can reject the application or withdraw existing rights. If a "lesser degree of danger" is found, the administrative body can attach additional requirements to the permit with a view to removing or reducing the danger. Before the administrative body decides on this, the company concerned must be given the opportunity to give its opinion on the Bibob report. From focus on criminal activities to application to regular activities The Bibob Act was originally adopted to assist administrative bodies in avoiding inadvertent facilitation of criminal activities, for example, by granting permits, subsidies or public contracts. The aim was also to counteract the entanglement of legitimate business and the underworld. Initially, the legislature targeted activities such as "the establishment, by means of permits, of companies which act as cover for or the execution of illegal shipments, the use of subsidies for criminal activities and participation in tenders for the purpose of laundering illegal assets". In other words, the Bibob Act was intended to be applied to companies engaging in inherently criminal activities under the cover of legitimate business. In this context, the Bibob Act initially focused on traditional risk sectors, such as the hospitality industry and the sex industry. However, the Bibob Act is now frequently applied to companies operating in good faith in a number of sectors of industry, including, for example, the chemical industry and refineries. When conducting an investigation into the context of an application for an environmental permit, the National Bibob Agency will, among other things, review the enforcement data of the competent regional environmental agency (omgevingsdienst) about the relevant company. This can reveal undesirable but common environmental regulation breaches. Examples are limited incidental and unintentional emissions into the air, discharges into surface waters or exceeding of technical standards regarding installations. Unlike the activities the Bibob Act was originally meant to address, the vast majority of pursued activities are not of an inherently criminal nature. They usually concern violations that occurred in the context of regular business operations, where the company had taken measures to prevent such violations. One could wonder whether this constitutes abuse of a permit, as referred to in the Bibob Act. After all, the fact that despite the necessary preventive measures, criminal offences have occurred in executing the licensed activities does not mean that the permit is being used to commit criminal offences or to make use of the advantage obtained from such offences. The permit is simply used for carrying out regular business activities, where incidental breaches of standards, qualifying as a criminal offence, unintentionally but inevitably occur. However, this is not the goal of obtaining a permit. On the basis of the Bibob report, the administrative body can nevertheless attach far-reaching conditions to the granting of a requested environmental permit, or even refuse the permit or revoke a permit that has already been granted. This type of Bibob Act application is far removed from preventing inherently criminal activities by rogue companies under legal cover and the associated risk of entanglement of legitimate business and the underworld, as originally intended by the Bibob Act. This has given the Bibob Act a completely different character, in stark contrast to its original intention. Remarks on the extended application of the Bibob-instrument In practice, the investigation and reporting practice of the National Bibob Agency also seems to not be well suited to such an application of the Bibob Act. Any offences found during investigations (in the context of the application for an environmental permit) usually relate to relatively minor incidents for which administrative sanctions have been imposed, such as an order subject to a penalty (last onder dwangsom). This type of common offence is included in the Bibob report without any weight being ascribed to them. This is because the National Bibob Agency does not give an opinion on the seriousness of the offences, nor does it discuss the context in which they took place, such as the relevant industry, the size of the company and the complexity of its business operations. In addition, no account is taken of the time that has elapsed since an offence took place; sometimes, the Bibob report includes offences that occurred over ten years ago. If the National Bibob Agency concludes that there is "serious danger" or a "lesser degree of danger" of abuse of the permit applied for, the relevant administrative body cannot ignore the Bibob report. After all, if something subsequently goes wrong at the company, the administrative body will be called to account, with reference being made to the Bibob report. The safest route for an administrative body is to decline the requested permit or to grant it subject to additional conditions or for a limited period of time. This may have far-reaching consequences. For example, the granting of a permit for only a limited period of time may jeopardise the continuity of business operations, which may cause problems in attracting longer term funding. This could also limit the scope for investing in the additional measures as required by the administrative body. Earlier this year, the Administrative Jurisdiction Division of the Council of State (Afdeling Bestuursrechtspraak van de Raad van State) determined that, if a Bibob report concludes that there is a serious danger that the requested environmental permit will be used to commit criminal offences, the administrative body in question must take into account the seriousness and nature of the relevant offences and the time that has elapsed since they occurred. In addition, the decision subsequently taken by the administrative body on the basis of the Bibob report must be proportional. However, the Council of State does not seem to have any problems with, or does not explicitly consider, the application of the Bibob Act to bona fide companies engaged in legitimate activities that do not lead to a potential entanglement of legitimate business with the underworld. The application of the Bibob Act to companies seeking environmental permits acting in good faith therefore seems to be here to stay. What to do? Companies in relevant industry sectors would be advised to jointly discuss this topic with relevant administrative bodies. In the meantime, companies applying for revision of an environmental permit should be aware of the possibility of a Bibob-investigation and the possibility that this can lead to a longer permit process. If an investigation leads to a negative report, a company should adequately respond to it and use the opportunity to express its views (zienswijze). The company will usually have to put the violations identified in the Bibob report into context. It is then advisable to engage in an active dialogue with the administrative body concerned about the permit applied for and the conditions potentially to be attached to it and, where necessary, to explain any consequences. Finally, companies should be aware that even minor offences, which are disposed of by means of a limited fine, or an order subject to a penalty or penalty order (strafbeschikking), can resurface later – and sometimes much later – in a Bibob investigation and be taken into consideration by the administrative body in the context of a permit application. The sanction for a violation can be so limited that a company may opt to not challenge it, even if there are legitimate grounds for doing so, simply because the costs involved are disproportionate to the sanction. Still, it may be useful to inform the relevant administrative body in writing about why the company does not agree with the sanction but refrains from objecting to it solely for economic reasons. Should a Bibob investigation occur at a later stage, this response will not be taken into account in the Bibob report itself, but the company will be able to refer to it if given the opportunity to express its views on the report.