Dutch court dissolves Dutch company for violation of EU sanctions

On 31 October 2023, the Rotterdam District Court sentenced a Dutch limited liability company and its director for EU sanctions violations. The court imposed a fine of EUR 200,000 on the company and an 18-month prison sentence on the director. The case related to shipments to Russia of electronic goods that could also be used for military purposes. The court ruled that those exports were prohibited under EU sanctions pertaining to Russia and had been concealed by methods such as a shipment route via the Maldives and forged documents referring to a bogus end-user in Ukraine. 

Following this conviction, the Netherlands Public Prosecution Service deployed its rarely-used power under civil law to seek dissolution of the company. On 15 April 2024, the Gelderland District Court granted that request and dissolved the company. The court also appointed a liquidator. Under Dutch law, the Public Prosecution Service has authority to request the dissolution of a legal entity whose purpose or activity is contrary to public order. However, in this sanctions case, it relied instead on its power to seek dissolution of a company that cannot achieve the objects as stated in its articles of association due to a lack of assets or that has ceased operations to achieve those objects. The Public Prosecution Service's reasoning, which the court followed, was that the company mainly received (illegal) income streams from Russia. The company is no longer allowed to obtain such income due to EU sanctions. Moreover, the convicted director, who was the sole staff member, is now a fugitive, and the company received no income over 2023. The petition for dissolution was therefore granted. 

The court's decision is part of a significant increase of enforcement efforts by the Dutch criminal authorities related to EU sanctions. Such enforcement has historically been relatively low profile but has risen sharply of late. In October 2023, the Public Prosecution Service announced a major settlement with Dutch companies pertaining to their participation in constructing the Crimean Bridge. It also reported that, since the invasion of Ukraine, it has launched over 75 criminal investigations into sanctions violations. In addition to this development, there are plans to significantly overhaul the Dutch sanctions framework in due course. The new framework could include the power to place companies under administration and to maintain public registrations of companies controlled by sanctioned parties. Houthoff's sanctions team submitted a response to the first pre-consultation round regarding this proposal in August 2023; formal consultation is expected sometime in the second quarter of 2024.